Friday, June 21, 2013

TLT 20-Year Treasury Bond Fund ETF Daily Chart

The 10-year Treasury note yield hit 2.47% yesterday and is now at 2.39%. The majority of traders believe that higher yields are here to stay, but are they? Global growth is slowing and folks may be surprised at the continuing disinflationary and deflationary forces moving forward. TLT and TBT are two ETF's that trade in relation to the $TNX, the 10-year Treasury note yield.  Notes and bonds are selling off over the last month so prices drop and yields rise. This action of higher yields corresponds to TBT rising and TLT falling. So if you believe in yields rising, you like TBT long. If you think yields will retrace lower, you like TLT long.

Over the last 24 hours, more traders are now jumping on the lower yield scenario in the short term and the 10-year yield has moved from the 2.47% high yesterday down to 2.39% at this writing. Both sides of the trade may get chewed up over the coming days. The indicators are positively diverged wanting to see a pop in the TLT (lower yields) but the short red lines show some near-term momo that may need burned off. The low in TLT was 109.28. Keystone's 80/20 rule says 2's lead to 8's many times so 112 hints that a 108 print may be in order.  TLT was a good idea a day ago, but the run-up in yields likely surprised those looking for lower yields, like Keystone.

The RSI is not yet oversold. The TLT weekly chart hints at lower prices so the yield trade appears to be one best left on the back burner until early next week. TLT is likely a buy for a quickie long trade but scaling in at 110 and lower and not chasing it today appears more prudent, and remaining nimble is key since the 10-year yield will likely move through 2.10%-2.60% for the next month and then roll over to more extended lower yields as the weeks and months continue into Fall. So TLT may be a better consideration in July-September. Yields may see a lot of churn over the next month or two so there are plenty of other areas that are probably more attractive areas to play. Keystone continues to forecast a disinflationary path ahead with flat to lower yields for months to come but if the 10-year Treasury note yield breaks above 2.58% it looks like the Treasury bears (lower prices higher yields) and inflationists are correct and Keystone will have to change his tune. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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