Treasury Tuesday

I’m going to try a new approach to posting and see if I can keep it up. The WSW posting gradually got so large that it takes a fair amount of work to make one. That makes me reluctant, which leads to them only happening once every few weeks. (Not all THAT much of a problem unless you are trying to day trade or trade daily / weekly swings). For longer term investors that’s not too bad, but it isn’t often enough to “call entry and exit” moments adequately. I’ve done some fast notices under “Economics and Trading”, but they have been a bit sporadic. The solution? Perhaps having one topic per day of the week, then the WSW becomes more a summary of the prior postings. We’ll see. It maybe that trying to do this daily falters on other time demands, or it might work out fine.

In particular, the “Momentum” part of the WSW posting really needs a “new sample” every so often that then is tracked for weeks or months. It isn’t well suited to a periodic “overturn” each week. So a new posting with a new list each week, that then stays for anyone who is trading them to track their choices, that makes more sense. So we’ll be having a “Momentum Monday”, a “Treasuries Tuesday” (that looks at bonds), an “Energy Humpday” on Wednesdays (as that is when the weekly oil reports come out), a “Thin Thursday” for those things that are more minor segments of markets, and “Frugal Friday” looking at value investments and bottom fishing in particular. Then there is “Saturday Stuff Day” for commodities and Ag, cash and currencies. Sunday becomes “Realestate Rest Day”. Somewhere along the line we have a WSW summary.

We’ll see how much time it takes and if I have the time and discipline to keep it up.

With that said, here is the first “Treasury Tuesday” posting.

Charts here come from Bigcharts.com. You are encouraged to go there, learn to set the controls (on the left hand side) yourself, and make your own charts. It is a skill well worth developing and then you don’t need to depend on me to make a posting every day.

“Static” Chart of bonds on the day of this posting (live chart follows). Click on it for a larger easier to read version. On the day of posting the live chart below will match and is easier to read without the ‘click through’.

Bonds 8 May 2012 Static Chart

Bonds 8 May 2012 Static Chart

This chart looks at TLH as the main ticker, so a medium maturity fund. You can see how shorter maturity bonds don’t move as much as longer maturity (in both directions).

As scares about Municipal Bankruptcy comes and goes, MUB bounces.

LQD shows how corporate bonds stack up against government treasuries.

TIP has an ‘inflation protection’ feature while WIP is the same thing but in currencies other than US Dollars.

Here we can see that TLH has crossed over the Simple Moving Averages and very briefly almost touched them from above. That’s the “be in” signal. (Traders could have entered earlier on the MACD crossover to “Blue on top” back in March) MACD is now “above zero” so things are in a rising trend over the time period of the MACD, and the lines have ‘merged’ which happens when a trend is steady. Looking at RSI, you can see that it was “near 20” in March (the “first call”) and then had a ‘higher low” at the start of April (the “pile in”) just about the same time MACD had that crossover. You will note that about the same time DMI goes to “Blue on Top” and the price takes a ‘gap up’. Many folks follow these indicators and some computer driven trades as well. It’s best to be a touch ahead of those “gap moves” (that often follow news events), but a bit riskier, while it is safer (though less gain) to be a bit slow on the entry and early on the exit.

If you look at the black TLT ticker line, it looks continuous at that point, but in fact had an even larger gap up. Notice, too, that while it’s more volatile and makes better trades to be in TLT, the more steady gain is in TIP (most of TLT rise was in that one spectacular jump back in August / September. This also shows how the “fast ticker” can call a play ( TLT spike up) and you can still get on board later in the slower tickers (MUB, TIP, IEF, LQD).

In general, this chart is saying it is time to be in bonds (and has been for a month or so).

TLH  -  10 to 20 Year US Treasuries
AGG  -  Aggregate of many maturities bond fund.
SPY  -  S&P 500 benchmark
MUB  -  US "AMT-Free" Municipal Bonds.
IEF  -  7 to 10 Year US Treasuries
TIP  -  Treasury Inflation Protected Securities TIPS
LQD  -  "High Quality" aka Liquid Corporate Bonds
TLT  -  20+ Year US Treasuries
WIP  -  World Inflation Protected Securities

Colors on this chart will be different as I’ve got SPY on it as a stocks vs bonds comparison. Typically you want a mix of both, or to swap between them (low involvement investing vs trading). Notice that when SPY ‘kneed up’ in October was when Bonds headed down.

Live chart of selected bonds

Live chart of selected bonds

Bigcharts Bond Chart Example comparing S&P 500 with TIP (Treasuring Inflation Protected Securities ), WIP World Inflation Protected Securities, and TLT Long Duration Treasuries (all ETFs).

Remember, too, that under the “Stock Charts” category (right side of this page) there are a variety of selected charts with particular collections of tickers in them. Including this one for bonds and currencies:

https://chiefio.wordpress.com/2011/12/20/bonds-overview-charts/

which includes longer descriptions of the tickers here, along with more and different tickers including some in other currencies.

Charts here may be a bit more variable from week to week as things of interest pop up. Right now, the non-US bond markets are not very interesting.

Some Links

A variety of ETFs, including bond ETFs, are at the iShares site. Choose the particular bond fund off of the “fixed income” tab:

http://us.ishares.com/home.htm

There also exists a variety of bond funds at the SPDR site

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in Economics - Trading - and Money and tagged , , . Bookmark the permalink.

10 Responses to Treasury Tuesday

  1. E.M.Smith says:

    Reading this over, there’s a caveat I need to add:

    WHEN the Treasury starts to raise rates, those long term bonds are going to get killed. TLT will plunge. So remember that bonds are NOT a “safe investment” and bond FUNDS have no maturity date so you can’t just ‘hold to maturity’ to get your principal back.

    It is important to keep an eye on The Fed and on The Charts here and WHEN the trade moves against you, dump any bond holdings. Eventually there will be a major profit to be made in a bond SHORT position. TBT is the ticker for a bond short ETF (presently in a prolonged decline…)

  2. omanuel says:

    Thank you, E.M. Smith, for your knowledge of economics and markets.

    A question: Will markets force world leaders to admit reality?

    Or can they manipulate markets as they have manipulated information on the energy that creates elements, sustains and destroys life?

    http://omanuel.wordpress.com/about/#comment-55

    (I suspect, the correct answer is NO and that is why the market is unstable.)

  3. George says:

    I’m really interested in keeping a watch on Greece. They can’t borrow more money because they can’t even pay the interest on the money they have already borrowed. Now they have decided to do away with “austerity” (and according to Iowahawk, gravity, too). So if they can’t borrow money and if they can’t live within their means that only leaves one other possibility: Mugabe economics. The problem is that Greece uses the Euro and Greece can’t print Euros so if they do want to be true Mugabeists, they will need to withdraw from the Euro, issue the Drachma, and then contract for wheelbarrows to be made so people can cart their money around while shopping.

    Watch and learn, kids.

  4. E.M.Smith says:

    @George:

    On CNBC World tonight there was some very interesting discussion of just that. With some Greeks saying they couldn’t and wouldn’t leave the Euro, some Brits saying that they thought if you left the Euro you pretty much HAD to leave the EU per the contract terms (but they, not being IN the Euro, could sit out just fine… go figure…) and a German saying ~’Everything will be just fine as soon as they realize we are right’… Oh, and the Talking Heads talking about how the Greek economy was imploding with tourism in the dumper and Athens having the highest vacancy rate for business real estate of ANY EU capital city and vacancy rate rising fast despite rapidly dropping rents.

    Somehow they couldn’t seem to bring them selves to say “implosion” or “complete melt down”…

    The German Guy also spent a fair amount of time saying that it was all OK as Greece was really rather small and it wasn’t like it was Spain or Italy (and they had no worries about them) and it would have been a disaster 3 months ago, but now not so much…

    Either it was the best bit of whistling while surrounded with graveyards or someone was delusional…

    Just Amazing.

    My only hope is that the thing blows up quickly enough that it can serve as a bad example prior to November. The alternative of giving them another Euro 54 Billion (IIRC) to keep them going a few more months would just be too cruel…

    Expect to see some kind of “pool” make the rescue for a few more months. Heck, Obama could cover it out of the DC Travel Budget and nobody would notice… so if it’s saving his policy until after the election vs letting it blow, expect to see us give $100 Billion (‘slippage’, don’t you know…) to the IMF and them funneling it on through. Then he can claim we didn’t bail out Greece while buying good news for the next 5 months…

    Now if Spain will just be so kind as to have riots this summer as the youth have no jobs and little hope, that would be very helpful to use as an abject lesson in Green Economics…

    Well, at least it’s interesting to watch…

    It would be a lot more interesting if it were not for the fact that California is putting a massive tax increase to the voters to cover its Green Dream (and massive deficits) and the Governor Moonbeam Brown has said if the voters turn it down, we’re toast. So there is a bit of a race condition between Greece and California. If it wasn’t for that I could saw we’re watching it from a safe distance. As it is, we’re in one leaky boat that is on fire, asking if anyone has a can of gas to get the engine started…

    Sometimes I wish I didn’t know so much about Economics, money, and business. Then I could just watch all this in Blissful Ignorance wallowing in pig heaven stupidity. Not having a clue that anything was wrong…

    The really strange thing is that the “Adult Supervision” at this party seems more drunk and less responsible than the teenagers with the bong and fifth of tequila…

  5. adolfogiurfa says:

    As the Sun approaches its conjunction with Jupiter on 13 May, we could see more central bank ‘jawboning’ about the joys of borrowed stimulus and the evils of austerity. Jupiter is the CEO of optimism after all, and it likes to keep as many people happy as possible.
    http://marketjyotish.blogspot.com/

  6. Pascvaks says:

    Anyone else making the apparent connection between the EU and the American Colonies under the Articles of Confederation? If they really want to get their act together over there they really need to grow up and face the music. They’ve got enemies to the left of them and enemies to the right of them and ice on the top of them and desert on the hot scalding bottom beyond the inland sea. Seems like an easy fix. But I ain’t one of ‘them’, or ‘them’, or they ‘them’selves. What do I know? Hummmmmmm… “Morris?”…. “Morris?”…. “Call for Robert Morris!”

  7. E.M.Smith says:

    @George:

    They won’t need to contract wheelbarrows, they can pay the unemployed to carry money for others… see it’s a “Jobs Program!” too (in the best semi-vacant starry eyed Pelosi look ;-)

    See: https://chiefio.wordpress.com/2012/05/15/greece-bank-outflows/

    for more…

    @Pascvaks:

    The EU is trying to marry antagonistic cultural norms together into one house. It doesn’t work.

    In America, we tossed off the Class Warfare and ethnic divides (at least for a while and for most) and thrived. Now that Obama and the Dimocrats are hell bent on bringing back “diversity” and Class Warfare / Race Card we’re headed for the rocks, too.

    See California for the best example. LOADS of class envy and “entitlement thinking” folks getting on the Doles (we have several…) with the “makers” packing up and leaving town. Government spending and government union “retirement entitlements” hitting the rocks; so the answer is TAX MORE!!!! like that will bring back a productive base. The state is rapidly on it’s way to being a Democratic Paradise. Hispanic majority (not yet, but whites ARE already a minority, yet attacked as ‘the majority’, go figure…) with large populations of other minorities; often with a history of dependency on government handouts. Lots of the non-handout folks on a different government dole – paid government jobs and retirement. Missing from the equation? Net Wealth Production. Yeah, we make some movies “for export”, but even there more movies are being made out of State for economic reasons.

    So the answer? Government subsidy of things like a $10 Billion “Train to nowhere” and 40% or so of “income” coming from The Feds. (Nothing like finding another pocket to pick…)

    We also do have a large farming base due to the weather and investments in irrigation infrastructure from 40 years ago. Yet even there they hare shutting down the water for farming and letting it run to the sea (to “save” a bait fish minnow that may not be a distinct species anyway and where the ‘fix’ may not fix it.) More farmers leaving high labor crops for low labor crops. (In my old home town, peaches used to be big, hand picked. Now it is more mechanically harvested crops and the peach cannery is closed. We’ve also lost meat packing from the area. Now the cattle are shipped out of state…)

    The election in November will be interesting. The Governor “Moonbeam” Brown has “bet it all” on two large tax hikes. Sales tax and income tax. Sales tax is already 9+% and I buy as little as possible in state. Any job I get I’ll be looking out of State. IF I ever get a book written, the property rights / copyright will be signed over to an out of State holding company. Higher tax rates will help this how?

    And if the tax hikes do not happen? Then we’re still in a mess with no way out.

    So we’re headed back to the same EU / Confederation problem. Divergent cultural base with divergent economic ethos and with a Socialist Bum State looking to suck down assets from the other states for current consumption. Not going to work out.

  8. E.M.Smith says:

    Oh, and I ought to point out that bonds continue to rise right now. Though RSI is at 80 now, so the trend ought to be weakening “soon”…

  9. Pingback: WSW, Sunday, 20 May 2012 | Musings from the Chiefio

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