Market volatility has come back to the forefront in recent weeks, with equity indices around the globe experiencing broad swings in both directions. Often times during periods of heightened market volatility, it’s interesting to take a look at the US Treasury market to see if there are any noteworthy technical developments taking shape. The global bond market is massive in size, and developments within in it can often have an outside influence on other asset classes when it comes to asset allocation and money flows. At Dorsey Wright Money Management, investors can gain exposure to the fixed income market in a number of ways. Both the Tactical Fixed Income & Balanced strategies are available through seperately managed accounts. More information on these products can be found here:
iShares Barclays 20+ Year Treasury Bond ETF (TLT): (Point & Figure)
We wanted to take another look at the point and figure chart of TLT in order to get a better idea of the current supply & demand situation for US Treasuries. Previously, we noted the TLT was coming into a major uptrend support line near 113.00. This uptrend line represents an area where buyers (demand) have previously overwhelmed sellers (supply). On the most recent test, the bond bulls once again showed up in force as the level held firm and the TLT has since produced a significant rally. In fact, yesterday’s move above 119.00 produced a double top break out pattern which has measured move price target of 133.00. At Dorsey Wright Money Management, we don’t use these developments as an actual buy signal (we use our RS matrices to determine those), but we do believe it’s a development worth noting. Time will tell if the TLT achieves its measured move target of 133.00, but given the double top break out it is surely something to keep an eye on and may signal a period of even lower interest rates lies ahead.
Dorsey Wright currently has positions in TLT
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