ChartWatchers

Stocks and Treasuries: The Yin and Yang of the Markets

 | 

The 20+ Yr Treasury Bond ETF (TLT) retreated as stocks advanced from mid April to early June and then popped as stocks dropped this week. Bonds are the natural alternative to stocks and TLT appears to be forming a classic bullish continuation pattern.

Let's first compare performance for these two opposites. Year-to-date, TLT is up 18.62% and the S&P 500 SPDR (SPY) is down 5.20%. However, performance looks a little different when we start from March 23rd, which is when SPY bottomed. SPY is up some 36% and TLT is down around 2%. The decline is not drastic, but safe-haven bonds clearly underperformed when riskier stocks surged.

The next chart shows TLT surging to a new high as stocks plunged in March and then forming a possible cup-with-handle pattern. Note that this pattern is still early stages because TLT has yet to confirm with a break above rim resistance.

This week's reversal in a key retracement zone and upturn in the PPO suggests that a resistance challenge is imminent. Notice how the April-June decline retraced 50-61.8% of the March-April advance. This is normal for a correction and the PPO signal line cross indicates an upturn in momentum.

This week on TrendInvestorPro I tested a five indicator breadth model going back to the beginning of decimalization (2/1/2001). This model's returns are as good as buy-and-hold for SPY, but with much lower drawdowns and less exposure (risk). Such models can help you stay on the right side of the market and a new signal triggered this week. Get immediate access with a subscription to TrendInvestorPro.

Click here to take your analysis to the next level!

-----------------------------------

Choose a Strategy, Develop a Plan and Follow a Process

Arthur Hill, CMT

Chief Technical Strategist, TrendInvestorPro.com

Author, Define the Trend and Trade the Trend


Want to stay up to date with Arthur's latest market insights?

– Follow @ArthurHill on Twitter

– Subscribe to Art's Charts

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
Subscribe to ChartWatchers to be notified whenever a new post is added to this blog!
comments powered by Disqus