Bonds Delivered the Fed Statement, Not Bernanke

• Posted by Greg Harmon
• on September 22nd, 2011

You think the Fed Policy statement was crafted by the Governors and Chairman Bernanke? Wrong! It was the long bond ($TLT) that did all the talking after this meeting and it had a lot to say. Take a look the three major statements it made.

1. The 2 Month Dance With Equities is Over

The ratio chart of Treasuries ($TLT) against Equities ($SPY) broke out of the loose 2 month wedge higher and with a strong bullish Marubozu candle. The other technicals, the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicator, support continuation of this move out of Equities and into Treasuries.

2. Throw Away Your Junk, Risk is Off

The ratio chart of Treasuries ($TLT) against High Yield Bonds ($JNK) also broke out of a rising wedge with a long and strong bullish Marubozu candle. The rising RSI and positive cross in the MACD support continuation a continuation of a move out of risk and into safety, from High Yield into Treasuries.

3. Gold is My Bitch

The ratio chart of of Gold ($GLD) to Treasuries ($TLT) shows a break back below the 6 month channel. Gold will not take this statement lightly and may recover soon but the message was delivered with a strong blow through the previous March support level as well. The falling RSI and MACD support continuation, but the inverted Hammer may signal a reversal, if confirmed. But for now a clear winner.

Pay attention to these statements. Treasuries are not just talking trash, they have had this market correct all along.

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