Are long bonds and interest rates the current political football?
Sure seems that way considering all the FED talk and comments by Trump on rates and Jerome Powell.
The last couple of days, after rising yields and a big drop in iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT), the trend may have reversed.
Why is this important?
TLTs are a gateway to assess risk on or off in the market.
We like to compare the performance of the long bonds (20+ year bonds TLT) to the performance of the high yield, high debt bonds (HYG).
We also like to look at the long bonds compared to the benchmark or the SPY.
The monthly chart is another longer-term view to watch, especially as we examine both the (23-month) and (80-month) moving averages.
We liken both these moving averages to business cycles, 2-year and 5-6-year respectively.
Currently, the monthly chart shows the long bonds trying to get back over the 23-month moving average.
That could be significant as October ends for the bonds and equities markets.
For one, it could be simply that the anticipation of lower rates both here and abroad is good for the sectors that have been waiting for lower rates.
These sectors include the financial, small caps, transportation, and regional banks.
However, it could also mean that fear is returning to the market, so we will watch for that too.
One key price point for the TLT to clear is 100. That is recent resistance.
Looking at the Daily chart,
The bottoming formation or confirmed reversal pattern happened 2 days ago.
TLT though, continues to underperform SPY.
Real Motion (momentum) is in line with the price action.
TLTs are also underperforming HYG (not shown).
This all means that while TLT has bounced from the recent lows, the rally is more noise than a sea change.
And that is great for the Economic Modern Family.
ETF Summary
(Pivotal means short-term bullish above that level and bearish below)
- S&P 500 (SPY) 575 support 585 resistance-5800 first time!
- Russell 2000 (IWM) Cleared 225, can we see 227 clear?
- Dow (DIA) 435 next? If holds 425
- Nasdaq (QQQ) 485 pivotal support 500 resistance
- Regional banks (KRE) If this level over 60 holds, impressive
- Semiconductors (SMH) 242 support 265
- Transportation (IYT) All-time highs in a Modern Family member? WTG!
- Biotechnology (IBB) 142 support zone 146.50 resistance
- Retail (XRT) 78.99 the highest monthly close since 2022-keep that in mind
- iShares iBoxx Hi Yd Cor Bond ETF (HYG) 79.50 nearest key support