Treasuries Tuesday

Yes, I know it’s Wednesday… I’m just trying to get back in the habit… It’s hard in the middle of summer when things are generally flat to falling to be watching markets… But “it needs doing” so I’m going to get caught up again. Even if none of it means much when The Fed and the EU are making everything a news driven market and November will re-shuffle the deck one way or the other anyway… So time horizons are either “tomorrow” OR 2 months and not much else…

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.

The prior version of this posting is here:

https://chiefio.wordpress.com/2012/06/13/treasuries-tuesday/

Live chart of selected bonds

Live chart of selected bonds

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

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).

Interpretation

We have recent highs, but not higher than prior highs. The potential for capital appreciation is pretty much gone and the “returns” are nearly nil, so what’s the point? Yeah, sitting in cash is crummy. Sometimes it is the lowest risk, even if their isn’t much return, simply because nothing else has much return either.

Last time I’d said:

There are a a few stages to any reversal of trend. Until they are all completed, it is not a ‘confirmed exit’. However, the early stages can be seen and generally indicate at least a reasonable time to start lightening the percentage. Why not just say “Be Out!” all in one go? Because markets often move in waves. A wave having a “dip” acts very similar to the last wave topping and rolling over. So we depend on trade rules to ‘step out and be ready to get back in’ until the “be out” is confirmed.

For now, price is still above the simple moving average stack and they are still ordered from fastest to slowest. That’s an ongoing “bull market” run until proven otherwise. MACD has had an inflection to put “red on top” but is still above the zero line and has only a modest angle downward. While DMI has had the blue line cross the black ADX line, it is still on top. Again, not a “bear market” trend confirmation.

So we must treat this as a ‘dip’ in an ongoing bull market until it confirms a trend reversal (via DMI Red on top, MACD below zero, and an inversion of price and the SMA stack.

But what about RSI? It has touched 80, and then had a ‘lower high’. That is the “first call” for a top.

Things are still that way.

The trend is weak, but not yet a flat out “exit”. Still, I’m not seeing much reason to take the risk of bonds either. (What risk? Well, WHEN The Fed starts to raise rates, bond values fall and your bond portfolio loses value. Best to be out before then.)

Last time I’d said:

All in all, I’d expect something similar to that pattern this summer and fall. It would be a reasonable risk mitigation to move half of any bond position into other assets or cash. If the reversal to a decline is continues, then the rest can exit as well. If this is a ‘buy the dip’ moment, then some of the position continues to participate.

And that is still about where we are. In a “Flat Roller” market you can tighten the time scale and trade the ripples (move to a 10 day hourly chart) while you wait for a new trend (up or down, but most likely down for bonds now); or you can choose not to play and just let the cash sit until things are more interesting. (Or find another market altogether.)

SPY is showing some life, so perhaps time to look at rolling more into stocks. (We’ll look at that in another posting). News Flow was all about the drought causing corn and soy prices to spike (but to catch that took a fast response in one particular week, so not for investment oriented folks, more a fast trade behaviour).

Other Sources

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/

One of them being the “One Stop” quick chart of the basics:

https://chiefio.wordpress.com/2012/06/04/a-very-useful-one-stop-investment-chart/

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...
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2 Responses to Treasuries Tuesday

  1. Pascvaks says:

    Curious, I went to the chart link and made it monthly for the last five years. Like looking at a very dry cup with some innocuous tea leaf specks strewn on the inside. The Celt-Gypsy in me said, “Hummm!”. Anyway for what it’s worth and to save other celt-gypsies the effort –
    http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Fund&symb=spy&time=12&startdate=1%2F4%2F1999&enddate=8%2F21%2F2011&freq=2&compidx=aaaaa%3A0&comptemptext=tip+tlt+wip&comp=tip+tlt+wip&ma=4&maval=24&uf=0&lf=2&lf2=4&lf3=1024&type=4&style=320&size=3&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=15&x=54&y=12

    Reading between some pretty incredably thin lines the PoliSci Guy in me said: “If Wall Street and the Global Markets were betting on the come as the last campaign was going on four years ago, they gave up on McCain as a ‘Water Walker Mr. Fix-It’, and the likely winner, grudgingly but consistantly during the campaign; and when ‘Whats’His’Name’ won they flat out ran for the hills.” OK, I like to embellish a little. Now! Here’s the forecast for the next four years from the Sage of Cha based on Market Indicators – “It’s 50:50 with a slight incline toward Roma’ney at the moment. Inclined Up = Roma’ney, Inclined Down = What’sHis’Name.

    PS: “When not much is happening, not much will happen.” But that’s only good as a general rule;-)

  2. Pingback: Treasuries Tuesday (on Friday…) | Musings from the Chiefio

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