It has been a huge move on the $USB from one end of the spectrum to the other. It was a year ago that we discussed getting long the TLT which represents the long bond. With the extreme move over the last three weeks, we have reached the upper trend line. A move above the upper trend line is still possible, but this has been a huge trend through 2014 and this would appear to have signs of exhaustion with all the gapping as shown in the zoom panel. The Percentage Price Oscillator (PPO) is clearly at the top end of an extreme move. In the last 30 years, there have only been 4 moves to this extreme.
For investors thinking this move is overdone, they may want to follow the TBT closely for signs of an entry if this up trend on the $USB breaks. TBT is an ETF for a strategy on long dated bonds getting weaker in price, stronger in yield. With the big moves in the currency market this week, we may see a break in this long bond and the $USD at the same time. This would probably mean global investors moving out of the $USD and the US Bond Market into something else. With the ECB expected to do some QE next week, the timing could be right here, right now. Watching this play out is as interesting as who will be going to the Superbowl!
Greg Schnell, CMT