Bond bears and especially naive technical analysts who think that they can make money out of bonds by just looking at charts and applying methods of analysis established for the stock market 80 years ago are getting another lesson. Only when they give up and try to go long bonds then prices will plunge and yields will rally substantially. Speculators will lose both ways.
A month ago I wrote how speculators were hit hard and when they were expecting a bond market drop there was a strong short-term rally. TLT rose 2% on February 25 and bears were crashed. Then after 9 trading sessions, the up move was undone and bears thought that this is it and the drop they were expecting was imminent. They were fooled again, crashed and slaughtered, as the TLT chart below shows:
The RSI(14) is still much below ovebought territory. Strong resistance is at $119.67 and then at $120.70. Any rally above those levels may cause a test of the 200-day moving average at $122.65
In a post on January 3 of this year when yields of 10-year Notes were at the same level I wrote:
“The FED may still be in control of the game and may target again a yield of 1.50% for the 10-Year Note. Do you want to bet all of your investment capital that the FED will not succeed? “
Something that bond bears should always think about. Making a lot of money out of bonds is not going to be easy. At least not for naive speculators of the “this is a triangle” or “this is a wedge” frame of mind in the era of HFT and total FED control.
Disclosure: no relevant positions at the time of this post
Charting program: Amibroker (Charts created with AmiBroker – advanced charting and technical analysis software. http://www.amibroker.com/”)