TLT: Rates are likely to rise due to fundamentals
#TLT has a great bullish signal in the daily chart, interestingly it aligns with reaching the election date with a rally before a crash if Biden is elected.
The recent price action has been forming a triangle like pattern since the COVID crash, if we plot an inside trendline connecting the lowest highs of the main swings, it tells us that we hit support once more, before rallying last couple days.
Govt spending is likely to end up impacting bond yields over time, so
TLT is a ticking time bomb in the mid to long term. Investors are likely to demand higher yields if deficits increase further, since they've already ballooned substantially since the lock downs started. A liquidity shock would exacerbate this effect, but for now everyone believes rates will go to 0 and that the Fed will backstop any liquidity crisis rapidly. Inflation is unlikely for the time being, at least until lockdowns are ended globally and the economy recovers. The potential GDP growth gap vs reality is still huge, and unlikely to get filled any time soon.
Output is not going to recover to pre crisis levels quickly, the damage to the real economy is huge and the world has a growing leftist problem, instability is likely to reign for a long time until the world reorders into a new status quo.
The chart will tell us when to flip short here, probably using futures to get the best possible returns.
Cheers,
Ivan Labrie.
The recent price action has been forming a triangle like pattern since the COVID crash, if we plot an inside trendline connecting the lowest highs of the main swings, it tells us that we hit support once more, before rallying last couple days.
Govt spending is likely to end up impacting bond yields over time, so
TLT is a ticking time bomb in the mid to long term. Investors are likely to demand higher yields if deficits increase further, since they've already ballooned substantially since the lock downs started. A liquidity shock would exacerbate this effect, but for now everyone believes rates will go to 0 and that the Fed will backstop any liquidity crisis rapidly. Inflation is unlikely for the time being, at least until lockdowns are ended globally and the economy recovers. The potential GDP growth gap vs reality is still huge, and unlikely to get filled any time soon. Output is not going to recover to pre crisis levels quickly, the damage to the real economy is huge and the world has a growing leftist problem, instability is likely to reign for a long time until the world reorders into a new status quo.
The chart will tell us when to flip short here, probably using futures to get the best possible returns.
Cheers,
Ivan Labrie.
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