Navigating the Bond Market: Trends and Insights
TLT: A Bearish Channel Persists
The iShares 20+ Year Treasury Bond ETF (TLT) has been stuck in a bearish channel since September, with a recent gap higher on Wednesday following the CPI report. This move was accompanied by above-average volume, indicating a potential shift in market sentiment. Despite this, daily momentum has been stuck in oversold territory for a significant portion of the past three months.
Key Levels to Watch
To overcome the current bearish trend, TLT needs to break through the first key upside level at $87.50, which marks the lows from April 2024. The next hurdle lies at $89.50, the September lows. On the downside, a break below the recent lows at $85 could lead to a critical test of the October 2023 lows.
Market Sentiment: A Mixed Bag
Market sentiment from the two- to 10-year range remains bearish, with fund flows being negative but not severe enough to indicate panic. The Commitment of Traders (COT) data also suggests a less bullish outlook. However, it’s worth noting that when COT data turned less bullish in April-June 2024, bond prices actually rallied.
SLV: A Bullish False Breakdown
Meanwhile, the iShares Silver Trust (SLV) completed a small head-and-shoulders pattern on December 18, but failed to see significant downside follow-through – a positive sign. It’s possible that the formation since the peak on October 22 was a bullish, three-wave, ABC decline. SLV has rallied above the low from late November, creating a bullish false breakdown. Additionally, the ETF has broken above the bearish trendline off the October peaks, suggesting a potential shift in momentum.
What’s Next?
As investors navigate the complex bond market, it’s essential to keep a close eye on these key levels and market sentiment indicators. Will TLT break out of its bearish channel, or will SLV continue its bullish momentum? Only time will tell.
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