Watch your bonds

US bonds (TLT- US long bond chart below) look to be forming a small triangle on the weekly chart. Seasonality is strong for bonds until the end of October. If you hold US bonds, stick with them but be aware that a breakdown from the triangle would be bearish – especially if that occurs near the end of their seasonal period of strength coming into winter.

TLT SHORT

Canadian long bonds per the XLB chart below show consolidation just under 26.75. The ETF – which does a fine job of representing the Canadian long bond picture – suggests an overbought scenario. Its trading about 10% over its 200 day MA, which is a rule of thumb point I use to spot overbought situations – something a reader was enquiring about recently. Again, an eye should be kept on this ETF and bonds in your portfolio as we approach the end of October – or if we see breakdown from the current consolidation pattern.

xlb

 

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8 Comments

  • “WE ARE SPENDING WAY TOO MUCH TIME WORRYING ABOUT THE FED…” (CNBC)

    HEARD TODAY: “PEOPLE IN GERMANY AND JAPAN BUYING SAFE TO “PARK” THEIR CASH MONEY BECAUSE OF NEGATIVE RATES IN THESE TWO COUNTRIES.. . SERIOUSLY?

    Reply
  • As hard to believe this can happen, isn’t it more likely that the triangle pattern breaks out in the direction of the primary trend, that is, up? It would be consistent with canadian’s own long-term bonds, which look to be getting a new wind from Mr. Poloz dovish interest rate comments today. I suppose all we should do is wait. It *is* something being watched by other great traders, such as J.C. Parets (@allstarcharts). Thank you Keith.

    Reply
    • Yes, the odds are for a trend direction to remain, but my comment is that new bond buyers might want to be cautious for the potential of a breakdown. Its not known if they will break upside or not–and consolidations are to be respected as potential trend changers. Not to say it will happen–just saying it MAY happen and thus, keep an eye on your bonds!

      Reply
      • Well, well, I guess the TLT is breaking to the downside. Maybe this time, people really believe this rate hike is coming. And our safe staples suddenly don’t look so good!

        Reply
  • one topic that may deserve an update is the US$.
    The last update I saw was May 16, 2016.
    One BNN guest recently made the following comment “we are at potential cross-roads for the U.S. dollar again after a period of weakness.” You called the weakness so now I wonder do you forsee some strength going forward?
    So I’d appreciate your perspective on this comment and whether there may be a play here. WRT plays:
    i) one is to hold assets in US$ such as equity but risk downside on any market pull backs or
    ii) move some cdn$ from cdn accounts to us$ in a US account or
    ii) what can an average trader do to invest directly in a US$ vs cdn$ trade?
    Cheers

    Reply
    • I’ll blog on the dollar next week and try to answer these questions–thanks for the idea.

      Reply
  • Don’t wish to be picky, Keith, but my calculations put XLB (which I own) at 5.5% above the 200 day MA (daily chart) not 10%. Am I wrong?

    Reply
    • Fred–you are completely correct on that. In fact, its about 5% as you say, TLT is about 8% over the MA. Arg!
      I have to admit I rushed doing this blog writing it quickly before leaving to cottage and screwed up –ahhhh!
      Thanks for catching this, my face is rather red right now!!!

      Reply

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