Are Bonds about to plunge? And if so (or if not), what are the implications for stocks, gold, Silver and other precious metals?
Let's have a look at TLT, which is the iShares Barclays 20+ Year Treasury Bond Fund.
Back in 2008, at the climax of the financial crisis, TLT was very stretched above the 200MA, and the RSI was very oversold on a weekly basis. Recently, we had a similar situation, although right now, RSI is not oversold anymore but instead is forming negative divergence, as it sets lower highs and lower lows on the weekly chart, while price recently set a potential double top.
When we look at TLT until 2010, we can see that price retraced exactly back to the 50% Fibonacci Level, where it found strong support. This level also happend to be a level where the long term trend line came in…
If bonds would top here, that would likely be caused by investors rushing out of this (perceived) risk-free asset class, and into more risky assets like stocks.
That would probably involve a more sustainable (or at least more sustainable as perceived by the market participants) way out of this Euro Crisis, which has been making headlines in recent months, causing investors to rush out of risky assets and into bonds.
We can see from the Commitment Of Traders (COT) reports that Commercials (usually seen as the "Smart Money") have taken on HUGE long positions in the EURO, while Speculators (usually seen as the "Dumb Money") have taken on HUGE Short positions:
However, Commercials have deep pockets and can stand the dips (which they usually keep buying)…
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