From Forbes:
The completion of a developing chart pattern in this key bond ETF
could decidedly shift the outlook for the stock market in the weeks
ahead.
The bond bull market of 2011 is likely to be remembered for many
years. The buying frenzy both in the US and overseas started early in
2011, and who would have expected the sale of MIT’s 100-year bonds to be
oversubscribed?
The summer spike highs in the bond market did suggest a top was being
formed, but after the initial round of selling, bonds have held up
quite well. The technical patterns for the longer-term instruments can
be interpreted as continuation patterns that would be resolved by
another push higher in prices and a push lower in yields.
This is also the most likely scenario when looking at the long-term
yield charts of the ten-year T-notes. The shorter-term instruments look
more negative, while junk bonds look even more vulnerable.
For most, it is the liquid bond ETFs that can offer opportunities for
investors and traders, and over the coming weeks, these funds should be
watched closely.
Chart Analysis: The
long-term chart of the yields on ten-year T-notes shows that on
September 22, yields hit a low of 1.69%. Yields rebounded in late
October, moving back to a high of 2.40% while stocks were also making
highs.
- The October highs form the upper boundary of a flag formation, lines b and c
- Long-term support that connects the 2008 and 2010 lows, line a, was
violated in August, which is negative for the intermediate term
- The rebound has so far has fallen well short of the 38.2% Fibonacci retracement resistance at 2.48%
- There is key support now at 1.88% and the downside projections from the flag formation are as low as the 1.28%-1.32% area
The iShares Barclays 20+ Year Treasury Bond ETF (TLT) hit a high of $125.03 on October 4 before reversing sharply....MORE
