Today, the 20-Year Bond ETF (TLT) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. This was the result of a downtrend lasting over two months. We note that the PMO has been running flat below the zero line for a month, which tells us that steady downward pressure has been applied to price.
On the weekly chart, we observe a bullish reverse head-and-shoulders pattern, which executed when price broke above the neckline and rallied for a couple of weeks. Next, it performed a technical pullback to the support line. If the support fails, the pattern will abort, and we will assume a bearish outlook in this timeframe.
We have been watching this 46-year monthly chart of the 30-Year Bond for a few years now. An extremely long-term (40-year) rising trend line was violated in 2022. At the time, we asserted that bonds had turned bearish and that condition would most likely persist for many years. We have not changed our outlook. There may be encouraging rallies from time to time, but we believe they will fail.
Conclusion: The LT Trend Model SELL Signal was triggered by a persistent two-month decline. In the longer-term, bonds appear to be attempting a rally. Our outlook is bearish, but we need to see how far the rally can go. In any case, we believe the ultimate outcome will be bearish.
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