Is the US Treasury ETF, TLT, Accelerating Down?

Two weeks ago I called a top in bonds based on the charts of 3 bond ETF’s, iShares Barclays 20+ Year Treasury Bond Fund (Ticker $TLT), iShares iBoxx Investment Grade Corporate Bond Fund (Ticker: LQD) and SPDR Barclays Capital High Yield Bond Fund (Ticker: JNK). While my prediction that the JNK would be the final nail in the coffin still has not come to pass, the TLT is now below it’s 100 day Simple Moving Average (SMA) and the LQD has fallen below the 50 day SMA. Here is the daily chart of the TLT.

This ETF has clearly broken down through the uptrend line and is hoping it can find support at 97, where it has before in July and August. Below that the 200 day SMA is looming at 95.44 currently. But what interests me today, watching this macro indicator, is the most recent trend. Look at the chart below of the TLT for the past month on a 5 minute scale.

This shorter timeframe chart shows a clear down trendline (marked A) driving TLT lower since peaking October 6th. But look what has happened the last 3 days. After popping above the downtrend on the 25th TLT has created a steeper downtrend line (marked B) accelerating its pace of decline. Now it is only 3 days thus far, so it could easily reverse. I took advantage of that pop to switch my short bond position out of being long the Proshares UltraShort 20+ Treasury ETF (Ticker: TBT) and into TLT put options for March 2011. I will be watching this chart going forward, hoping for the steeper trend to continue but happy if the it reverts to the initial trend and holds below.

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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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