Bonds on Tilt

When I was a kid we had to go to an arcade, where they had many pleasure machines, to play a game called pinball. It is a novelty now at places where my kids go to birthday parties and in the age of constant video games on demand on your personal device. Back then when things got crazy you might give the machine a little extra push to get the flippers to perform better. Too much push and the machine would light up with the word TILT flashing and your game was over.

The price action in the US Treasury bond ETF reminds me of that now. The ETF had started a solid down trend that accelerated after the election. But then nothing. A bottom to prices in mid-December and nothing after a rate hike and the prospect for more. Just 5 months of consolidation in a range. A bottoming formation. One day with a break to the downside in the middle of March and it quickly recovered. Tuesday changed that. The chart below shows that the ETF came into the week at the top of the range.

Monday the ETF held at the top, but the Bollinger Bands® turned higher. Tuesday the price broke through the range at the open and did not look back. Follow through Wednesday will confirm a reversal. And it has support for that to happen. Momentum has continued higher into the bullish zone and the shorter SMA’s are turning up out of a 3 way cross. This does not get much press in the technical world but when several SMA’s come together and then break it often is followed by an extended move in price.

Will this continue or was the break out caused by overzealous traders nudging the ‘machine’ a bit too much? There is still a big gap to fill and the 200 day SMA overhead. Both could halt any move in its tracks. We will see if it is just a TILT in Bonds or a real change in direction over the next few days.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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