Bonds Are Debating Risk on vs Risk Off
- Posted by Greg Harmon
- on May 24th, 2012
The risk on risk off trade is again at a testy point when measured with the ratio of the iShares Barclays 20+ Year Treasury Bond Fund, $TLT, against the SPDR Barclays High Yield Bond ETF, $JNK. A move in the direction of $TLT, higher triggers a break out of a bull flag with a target of 3.49, near the bottom of the October gap. The volume run up on the current move supports that and the Moving Average Convergence Divergence (MACD) indicator is positive with a Relative Strength Index (RSI) in bullish territory. Look for a move over 3.25 as the trigger higher. Risk off. But this ratio is also getting extended from the Simple Moving Averages (SMA) and that bullish RSI is in technically overbought territory. A move under 3.17 breaks the flag lower with a target of support at 3.04. Risk on. So which will it be?
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Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)