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Another Breakdown for Bonds

July 6, 2013

Last week TLT, our bond market surrogate, made a new low, then bounced up to the resistance of the declining tops line drawn from the May top. It turned down on Wednesday, we thought beginning a move to test the recent low, but today TLT didn't bother to retest the low. It gapped down below the support and kept heading south.

 

Screen shot 2013-07-05 at 1.40.31 PM


The situation is more obvious on the weekly chart. A massive top has been forming over the last two years, and price is headed toward support at 105. We are tempted to say that it is all over for bonds, but we can see that bond prices are nothing if not volatile. It is notable that the weekly PMO (Price Momentum Oscillator) has reached a level where it has previously found support.

Screen shot 2013-07-05 at 1.41.00 PM

Conclusion: TLT is near long-term support in price and internally, so a bounce in price is possible; however, the rise to over 125 was excessive in speed and amplitude, and we think that a more extended correction is needed.

 

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(This is an excerpt from recent blogs for Decision Point subscribers.)

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Carl Swenlin is a self-taught technical analyst, who has been involved in market analysis since 1981. A pioneer in the creation of online technical resources, he is president and founder of DecisionPoint.com, a premier technical analysis website specializing in stock market indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.


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