For all the talk of a) bonds being in a Fed-induced bubble and b) over-heated bond assets MUST flow into equities, the TLT chart looks bullish or perhaps more likely "not bearish". What I mean by that is TLT looks like it's going to be trapped in a box (range) for some time. (By the way, if anyone tells you the market MUST do something, just consider the source and the alternative).
When TLT broke the lower edge of the box with volume and FORCE in early March, I went short TLT (via long TBT) in anticipation of a larger sell off. However, the sell-off got absolutely no traction and I quickly covered for a small loss. What happened next is reminiscent of some of the best $SPX bottoms where price undercuts a defined support level and closes sharply higher in the same week. After undercutting the lows, TLT bounced back into the box on better than average volume and improved FORCE....and then the following week jumped sharply in price. This is bullish price action.
On the bullish side of the ledger, we have the following:
- Undercut of support and close above
- 5EMA and 10SMA are close to crossover (a few ticks away)
- FORCE index is green (positive)
- Volume on black bars is increasing
- Price closed above 5EMA and 10SMA
- Bullish "W" pattern on daily
- Bullish cup and handle pattern on daily
- Bullish triangle continuation pattern on daily
On the bearish side, we have the following:
- Downtrend is still in place with a series of LL's and LH's
- Gap remains open a few points below
- Volume on red bars is still high
Overall, I think odds favor TLT remaining in the current box for the next few weeks - perhaps months, but I will respect a break in either direction.
I have no position in TLT or TBT right now and don't plan on initiating one any time soon.
For more charts with alot less narrative, please see my public chart list (and the disclaimer, too!)
http://stockcharts.com/public/1109955
Here's the chart (courtesy of stockcharts.com):
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