Declining Yield, Rising TLT Follow Our Technical Script
by Mike Paulenoff
March 10, 2024 • 4:30 PM EDT
On February 23, Mike Paulenoff posted the following timely commentary about the bond market to MPTrader members:
"Benchmark 10-year YIELD and TLT (20+ Year T-bond ETF)-- I am getting initial, but very strong technical signals that the backup in 10-year YIELD from the late-March low at 3.78% to yesterday's (2/22/24) high at 4.35% is nearing exhaustion ahead of a rollover into another downleg within the larger downleg off of the October 2023 high at 5.00% (see my attached Daily Chart). Although YIELD is down only about 5 to 6 bps from yesterday's high at 4.35%, both my pattern and momentum work from the December low to the February high are starting to waffle, which is whispering to us to be careful about expecting additional upside on the long end of the curve."
Mike then transitioned his analysis of yield into a potentially actionable technical setup in the TLT (20+ year T-bond ETF):
"TLT is also behaving as though it has reached downside exhaustion and has completed the larger correction from the 12/27/23 high at 100.58 to Wednesday's (2/21/24) low at 92.07, which incidentally, amounts to about a 45% retracement of the prior major upleg (see my attached 4-Hour Chart). TLT has turned up for no particular reason and has climbed from 92.07 to 93.27. To really generate upside traction, however, TLT needs to climb through resistance from 93.75 to 94.55. At the moment, TLT exhibits the requisite technical setup to make a run at that resistance zone. Last is 93.27..."
Fast-forward 2-1/2 weeks, and we see on Mike's current Daily YIELD and 4-Hour TLT Charts that 10-year YIELD has plunged to last Friday's low at 4.04% -- a 6% decline from the 4.30% level it was at when Mike issued his February 23 alert. Meanwhile TLT has rallied sharply to last Thursday's high at 96.85, a full 3.8% above its price at Mike's alert.
This coming week, bond market traders and investors will be challenged by Tuesday's potentially consequential CPI inflation data, and again by Thursday's PPI, with Retail Sales data also lurking ahead on Thursday morning.
Is Mike's setup work ahead of the data indicating a likely directional market response to the data? Do yourself a huge favor by logging in this week and joining Mike's braintrust for their intraday technical and fundamental discussions about the bond market as well as individual stocks, sector ETFs, macro indices, commodities, and crypto.
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