SPY/TLT breakdown just happened this week (3 days to go till Friday close). Last two instances occurred in June/July 2008 and August 2011. See chart for SPY correlations. Watch thick blue line VERY carefully!!!
The TLT/SPX ratio has been a useful tool to anticipate market crashes in the past, and I'm seeing several signs suggesting a renewed risk-off period. This ratio broke a 28-month-long trendline in October after having hit its 2007 lows back in January. The 200-DMA provided support in November, leading up to the most recent market correction two weeks ago. The...
SPY/TLT shows the comparison of the price action of SPY and TLT. It looks like the money flows into TLT instead of SPY. This could be an important indication of future weakness of SPY, but is not a sure sign. This means that you could be fooled by this chart, but more caution is good advice here.
As of market close today (Friday), TLT broke out and TNX (10 year rate) broke down.
Looks more and more like 2008 and 2011. This Thursday and Friday are critical as I will learn if TLT is able to break out, and thus either validate or invalidate (at least defer it) this case. A further study reveals that during 2008 and 2011 TLT spikes, 10 year rate drops about 44%. If true this time, it should drop to 1.44%, coincident with 2012 all time low....
SPY/TLT ratio bounced back right from the support and may keep pushing up against the red resistance. Technically, this ratio is still weak given that it is still below 10 and 50 week MA, and its RSI is in a downward channel.
Expecting continued TLT strengthening, SPY weakening. Please see orange circles for technical indications.
The ratio had a fake breakout last week and now falls back under the resistance. So it is still following 2008 and 2011 pattern very well, and thus it is still very likely we will have a significant SPY drop and a significant TLT pop.
A breakout or breakdown will have significant impact on market. So watch it carefully in the next couple of weeks.