Bonds Break


The TLT(20+ Year Treasury Bond Fund) took out major support today.  The index closed at its lowest level since July of 2015.  More downside, considerably more downside, could lie ahead.  The TLT has a long way to travel before reaching oversold levels. 

We are long TBF and TBT(Ultra-Short 20+ Year Treasury Bond Fund) in some managed accounts.  Both of these inverse funds have performed quite well as the bond market has sold off this year:



Sentiment View

1.) AAII’s(American Association of Individual Investors) neutral reading has been above 40% for 3 straight weeks for first time in 10 months.

2.) Outflows from small cap equity funds: 14 consecutive months (Morningstar).

3.) BAML(Bank of America/Merrill Lynch) Global Fund Manger Survey lowest equity exposure in 18 months.

As contrarians, this is certainly good news.

Hat tip Ryan Detrick


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Record High Spread

Interest rates have certainly been a focus of late, and for good reason.  Here’s an interesting stat:  The spread between the 10 Year US Yield versus the 10 Year German Yield is at a record:


US 10-Year Yield: 3.08%

German 10-Year Yield: 0.64%

Spread at a record high: 2.43%

As always, great stuff from Charlie Bilello of Pension Partners

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The Long End Continues To Hold Major Support


The TLT(20+ Year Treasury Bond Fund)has been under intense pressure this week.  The index began to weaken on Monday before getting slammed yesterday.  This high volume breakdown drove the TLT back down to a major support zone that has held up extremely well over the last few years.  The $116.50 to $117.00 area marked major lows in 2016 and 2017 as well as the February, April and May lows this year.  The steady pressure so far this year has certainly softened up this key zone but until this area is convincingly taken out it should be given a great deal of respect.  A close below $116.00 would do a great deal of damage. 


The inverse of the TLT action is the TYX(30 Year Treasury Yield Index).  This index has not been able to convincingly clear 3.2% since the summer of 2015.  The 2015, 2016, 2017 and multi-month 2018 highs have been capped by the 3.2%-3.25% area.  This zone is weakening as well this year as pullbacks from heavy resistance become less deep.  Until cleared 3.25% should continue to be respected as major resistance.  A TLT move below $116.50 would likely drive the TYX to new multi-year highs. 

At time of publication we do not have a position in TLT.


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More Awakening in Consumer Staples?

Additional follow up to my post yesterday on options action in Coca Cola (K).

Yesterday someone purchased 20,000 Proctor and Gamble (PG) Jan 77.5 calls for $2.00 when the stock was trading at $72.65.

That was one of the largest single name equity options trades of the day, and worked out to a not trivial 2 million share commitment for a cash outlay of $4 million.


Gold fails to hold support at 1300.


Rates Rising, 10’s At New 2018 Highs

The TNX(10-Year Treasury Yield Index)is surging today.  The TNX is now trading at its highest level since July 2011:


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