Two months ago today I posted the chart below, sharing that yields had created a bullish falling wedge on 17-YEAR channel support.(see post here) At that time the yield on the 30-year bond 3.82%. The suggestion was to harvest bonds on yield support and to look to score on defense, by picking up TBF.
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Now look what has taken place in the past 60 days….
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A huge jump in yields has taken place over the past 60-days and the long bond has fallen over 10% in value! Keeping with the trend, it has paid to go long yields at the bottom of the channel (short bonds) and short yields at the top of the channel (buy bonds). This trading range play has worked pretty well over the past few years. Is it going to be different this time around?
Coincidentally, Bronson post yesterday on dShort discusses why shorting commodities and going long treasuries will be the thing to do – both trades (long commodities, short treasuries)may be becoming crowded.
cK….Suggested to buy TLT with a tight stop on falling channel support. The tight stop was in case the channel support failed to hold the rapid decline. In retrospect/hindsight it looks like the trade was early. Time will tell if Bonds can get any kind of a bounce at all. As you know we shorted bonds a couple of weeks ago at the highs. At that time, very few seemed to dislike bonds. Now it seems the majority don’t like them. Sentiment numbers starting to reflect a crowded situation in bonds???
Hi Chris, so in retrospect was it premature to go long on bonds with TLT last week? I got stopped out. Should still be looking to go long? cK
A couple of days ago you brought up TLT vs TBF. I got into a vertical put spread on TLT. The position is down (but not that much due to the spread!) Hoping things turn around for TLT.
Looks pretty reliable…keep us posted.
Side note…your charts are awesome…wish I knew what clipart you’re using:)
Rick