Watch TLT Support at Multi-Decade LowsPrimary Chart : Monthly Chart of TLT Showing Multi-Decade Support Levels.
A fair amount of charts have been published lately on the importance of interest rates, and conversely, long-term bonds, government or high-yield bonds. One well-known TradingView publisher @scheplick went so far as to describe the chart of the US 10-year yield as the most important chart for understanding financial markets in this season. His post was entitled, " The Most Important Chart in the World :
TLT is an iShares ETF that tracks the performance, generally speaking of long-term US Treasury bonds. Specifically, iShares describes TLT as an ETF that "seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than twenty years."
TLT has been in a severe downtrend since March 2020. Bonds yields move inversely to price, and TLT represents, in a rough sense, the price of an index or basket of long-term US government bonds with maturities greater than 20 years. So if long-term bonds remain in a downtrend, then this corresponds to the uptrend in long-term yields that has continued to break higher than anyone expects.
The Primary Chart shows TLT having reached long-term, major support at 2009-2010 lows. But a careful examination of TLT's recent lows reveals that it broke slightly below those lows, which isn't a good look for bond bulls in the long term. Supplementary Chart A shows 2009-2010 lows on a monthly chart (similar to the Primary Chart above).
Supplementary Chart A
However, TLT's reaching such a major support level, with a lower wick forming (at least initially), could imply a move higher in bonds and a concomitant move lower in yields in the near term. But remember that fighting a predominant trend (mean reversion) when it becomes extended can be one of the trades having the lowest success rate. But it can also have a higher reward rate if risk is managed well. SquishTrade does not recommend being long bonds here but rather commenting on how traders may react to major support levels in TLT's downtrend. They may be right or wrong—recall that no one likely expected long bonds to fall as far as they have, and many have been positioned long bonds since TLT was in the upper $90s!
The next few supplementary charts emphasize the nature and severity of the downtrend in long-term bonds, as represented here by TLT. The first shows TLT's 200-day simple moving average (SMA). Price is about –12.11% below the 200-day SMA as of mid-session on Friday, September 29/
Supplementary Chart B
Next, the VWAP anchored to TLT's long-term cycle high is shown in black. This confirms a long-term, and extreme downtrend in long duration US Treasury bonds. Long-term VWAPs do not always have such a noticeable downward slope. Even a bounce to $125 could present just a mean reversion (retracement) within this downtrend despite creating an uptrend on the daily or even weekly chart, which would be necessary to reach that distant level.
Supplementary Chart C
A Fibonacci channel below has been applied to a weekly TLT chart. Notice how the channel shows support right where the weekly lower wick formed—the 1.618 level of the channel. To be sure, this does not necessitate a long-term trend reversal (though anything is possible, and this could be the spot). But it does suggest the potential for a near term bounce in the shorter cycles.
Supplementary Chart D
Anyone wondering whether a long-term uptrend is still in place from the start of TLT's price history should consider the following chart. This shows decisive breaks of several long-term (and progressively accelerating) uptrends.
Supplementary Chart E
Year-end flows can be supportive of equities, though not always—note the late 2019 exception for CBOE:SPX and $NASDAQ:NDX. If some relief materializes in long-term to intermediate-term bonds, then this could coincide with some support in broader equity markets into year end, though this is by no means guaranteed.
Consider the following posts and charts on yield curve inversions posted by @SPY_Master and this author on TradingView:
These charts of yield-curve inversions should give one serious concerns about the near-term (3 months to 2 years) health of the stock market.
This post is in no way advocating any particular investing or trading strategy. Short-term trading and long-term investing can both be either devastating or profitable (or somewhere in between those extremes) to the person engaging in it.
And thanks for reading this and for your encouragement and support.
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Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
TLT
Rolling (IRA): TLT Nov 17th 92 to March 15th 92 Short Put... for a .97 credit.
Comments: Alas, this could not be meaningfully strike improved, so just rolling it out as is. The deeper the in-the-money it is, the farther out in time you have to go to get paid something decent ... . Collected .79 originally (See Post Below) plus the .97 here for a total of 1.76.
Rolling (IRA): TLT Nov 17th 94 to April 19th 94 Short Put... for an .85 credit.
Comments: Another that can't be meaningfully strike improved without paying a debit ... . Collected .75 originally (See Post Below). With the .85 here, 1.60 total.
And that ... ends the November contract housekeeping portion of our show. Unfortunately, I'll probably have to do some more of this in the December contract (ugh).
TLT Core Position (IRA)In the absence of some kind of face-ripping rally, I'm going to be assigned shares in TLT here shortly, starting with what began as an October 20th 93 short put and an October 20th 89 short put. Here, I'm using short puts as an acquisitional tool, attempting to acquire shares in multi-year weakness, after which I'll proceed to cover the shares with short calls. The short call premium, along with TLT's monthly dividend, will result in positive cash flow.
There are a couple of different approaches I could utilize here to manage the shares I'm assigned, one of which is to sell a call against each individual lot I'm assigned, laddering out short calls in time as I'm assigned shares. Since I've got quite a few contracts subject to assignment, this would result in sort of a covered call spaghetti-works.
Another simpler approach would be to see what the average cost basis of all the lots I'm assigned is, and then proceed to sell calls at or above that average cost basis in a single expiry. For example, the average cost basis of the two rungs shown here is (89 + 93)/2 or 91/share. With that cost basis in mind, I would proceed to sell two calls at or above the 91 strike at a reasonably delta'd strike in an expiry that's paying. Given the distance price has pulled away from my likely average cost basis, the calls are likely to be somewhat long dated.
Given the fact that my highest short put strike is at 94, I'm more likely to sell calls at 94 initially, wait to be assigned everything that I'm going to get assigned, look at the average cost basis at that point and then adjust the short calls accordingly. Because of its simplicity, this is the approach I'll be going with, looking to stay in the shares and manage the entire position on a fairly long-term basis.
As usual, we'll see how it goes ... .
$TLT bottom. Upside ahead targeting $100+As I wrote in my last post on TLT, I had a target of $88. $88 was hit on Friday and is now slightly below it today.
I went long both via spot and calls. I took March 15 2024 calls at a $101 strike price and I'm anticipating a large move higher playing out by then.
I've marked off resistance levels on the chart. Let's see how it plays out over the coming months.
I'm not a believer in the rates are going to stay higher for longer narrative. I do think they'll be higher than where we were in 2021, but I do not think they'll stay at 5+%. I think the financial system will end up being in trouble and the only out will be to bring down rates again. I do think that'll play out sometime in the next 6 months.
Opening (IRA): TLT December 29th 90 Short Put... for a 1.20 credit.
Comments: Adding a rung out in the Dec 29th expiry at a strike better than what I currently have on.
Since I'm in an acquisitional frame of mind with TLT, I'm pretty much going to run with these until they're approaching worthless (i.e., <.05). If I get assigned, I'll proceed to sell call against.
Rolling (IRA): TLT November 3rd 88 Short Put to January 19th 87... for a .42 credit.
Comments: Received an .88 credit for the 88 (See Post Below); rolling it down and out for a .42 credit. Total credits collected of 1.30.
If I'm going to get assigned, lower is naturally better, even if it's only a strike ... .
Opening (IRA): TLT January 19th 81 Short Put... for a .85 credit.
Comments: Targeting the strike paying around 1% of the strike price in credit, looking to acquire shares should we get "down there."
I would've erected a rung in shorter duration, but didn't want to do that if I couldn't get in at a strike that was better than what I currently have on.
Opening (IRA): TLT December 15th 89 Short Put... for a 1.12 credit.
Comments: Squeezing in another rung in the December monthly at the 28 delta 89 strike ... .
Since I'm getting kind of a spaghetti works here, will primarily look to add in the 45 DTE weeklies and manage the rest of the pasta as duration in those positions shortens.
Opening (IRA): TLT Oct/Nov/Dec Short Put LadderComments: Targeting the 16 delta strike here in successive expiries to generate free cash flow and emulate dollar cost averaging into 20 year+ maturity paper.
October 20th 89: .77 credit.
November 17th 87: .76 credit.
December 15th 86: .84 credit.
Since these aren't paying buckets of cash on a per contract basis, I'll look to manage these on extrinsic approaching worthless either by closing them out in profit or rolling for credit and duration to reduce my cost basis further.
Opening (IRA): TLT Nov/Dec 86/84 Short PutsComments: Targeting the 16 delta strikes in November and December to erect rungs at strikes better than what I currently have on to emulate dollar cost averaging into 20 year+ maturity paper.
November 17th 86: .83 credit
December 15th 84: .79 credit
Here, I'm fine with getting assigned and proceeding to sell short call against, but want to get in at the biggest discount the market will let me get away with because at some point, you know they're going to cut. Naturally, this may be months out in time ... .
$US10Y At a Important Pivot Point---
### Market Analysis: TVC:US10Y Nears Crucial Pivot Point
#### Critical Juncture for the U.S. 10-Year Treasury Yield
The U.S. 10-Year Treasury Yield ( TVC:US10Y ) is currently at a pivotal position that could significantly influence market sentiment. This important pivot point is marked by a specific blue line on the chart, serving as a key indicator for market direction.
#### Bullish and Bearish Implications
- **Below the Blue Line - Bullish for Markets**: If the TVC:US10Y falls below this blue line, it is generally interpreted as a bullish signal for the markets. A lower yield on the 10-year Treasury often suggests an increased appetite for riskier assets like stocks, as investors seek higher returns than those offered by government bonds.
- **Above the Blue Line - Bearish for Markets**: Conversely, if the yield rises above this blue line, it can be seen as bearish for the markets. Higher yields may indicate a shift towards a more risk-averse sentiment, potentially driving investors away from stocks and into the perceived safety of government bonds.
#### Monitoring Market Movements
The position of the TVC:US10Y relative to this blue line is a critical factor for investors to monitor. It not only reflects broader market trends but also helps in predicting future market movements. The yield’s behavior around this pivot point could provide valuable insights into the market's overall risk tolerance and investment direction in the near term.
Rolling (IRA): TLT Nov 17th 86 Short Put to Dec 15th 85... for a .32 credit.
Comments: Rolling down and out where it makes sense; out "as is" where it doesn't. Collected .83 originally (See Post Below). With the .32 here, 1.15 total.
I'm generally looking to try to avoid taking on shares above my current cost basis for the shares I've been assigned already and/or to take on shares at the best possible price that the market allows.
Opening (IRA): TLT Dec/Jan 77/75 Short PutsComments: Targeting the strikes paying around 1% of the strike price in credit at strikes better than what I currently have on. The basic bet here: that interest rates decline ... at some point.
(And, yes, it's been a somewhat painful trade so far ... ).
December 15th 77: .85 credit
January 19th 75: .84 credit
$TLT 20 Year Treasury Bond ETF The NASDAQ:TLT , or the 20 Year Treasury Bond ETF, appears to be undergoing a significant shift in its trend dynamics based on your description. Here's a breakdown of what you're observing:
1. **Bearish to Bullish Reversal**: This indicates that the ETF, which was previously in a downtrend (bearish phase), is showing signs of reversing to an uptrend (bullish phase). Such reversals are often identified through technical indicators like moving averages, momentum oscillators, or trendline breaks.
2. **Parallel Downtrend Break**: The breaking of a parallel downtrend suggests that the ETF has moved beyond a previously established downward channel. This is a technical pattern where the price moves within two parallel lines downwards. Breaking out of this channel can be a significant bullish signal, indicating that the selling pressure is easing and buyers are starting to take control.
3. **Bullish Consolidation**: After the initial reversal, it seems the ETF is now in a phase of bullish consolidation. This typically involves the price moving sideways or slightly pulling back, which allows the ETF to stabilize after the initial surge in buying activity. This phase often precedes further upward movement as it suggests that buyers are still interested at these higher price levels, and the selling pressure is not strong enough to push the price back down.
For a more detailed analysis, it would be beneficial to look at specific technical indicators such as Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), volume data, as well as key support and resistance levels. Additionally, fundamental factors impacting Treasury bonds, like interest rate changes, inflation expectations, and overall economic outlook, should also be considered to complement the technical analysis.
Remember, while technical analysis can provide valuable insights, it's always important to consider multiple factors and viewpoints when making investment decisions.
TLT ~ Have US Yields finally topped? (Weekly / Nov 2023)NASDAQ:TLT chart mapping/analysis.
Note: TradingView chart dividend adjusted.
Price action bouncing off Golden Pocket (66% Fib) support
Heavy trading volume = institutional activity (ie positioning?)
Rejection wicks on previous weekly candles = selling pressure still present (correlation with long-end yields holding strength)
Looking for re-test of lows + bounce to confirm double bottom support base established for bullish momentum.
Inverse play = price action engulfs previous candle, completes gap partial-fill + taps overhead resistance aka descending trend-line (light blue dotted).
Institutional short-squeezes could still be active - complimenting inverse play thesis.
Failure to break above/below either trend-lines = price action continues to contract until eventually ripping in volatile fashion in either direction.
Set alerts - monitor US yields - wait for trade to set up in your favour.