MIKE PAULENOFF'S ETF TRADING DIARY
While gold prices attempt to break out to the upside, the bond market continues to climb as well. Let's take a look at the pattern developing in the iShares Barclays 20+ Year Treasury Bond ETF (NYSE: TLT).
The TLT looks like it is about to take off from atop its 4-month base pattern, suggesting that longer-term interest rates should come down from current levels of 3.34% in the 10-year and from 4.16% in the 30-year. If the economy is improving like "everyone" thinks, which at some point implies higher inflation, then why would the bond market look like it is about to enter a powerful upleg?
If investors are concerned about gargantuan deficits, disappointing tax credits, and continued Obama govt spending, then why in the world would bond prices be on the verge of upside acceleration?
Maybe, just maybe, Mr. Market is anticipating 1) more equity price weakness; 2) another round of real estate defaults (commercial this time); 3) a retrenchment in the economic data heading into the Fall -- and starting with this Friday's Employment Report; and 4) a plunge in non-precious metal commodity prices because of retrenchment in global demand, especially China?
Who knows? The one thing we need to keep in mind technically is that the TLTs likely are sending us a message -- and for reasons that will become evident in the near future, lower rates are directly ahead.
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