That’s the message I read during my weekend reading, as analysts began to question the spectacular rise in the bond market.
“He ran his course“…
“Watch for a crash“…
“Here are other bank failures“…
And so on.
The headlines, however, are telling you a new bullish story.
THE iShares 20+ Year Treasury Bond ETF (TLT) has climbed 20% since its lowest level in October. I didn’t see much about it over the weekend.
Fund flows into the bond market are increasing, as institutions reallocate their portfolios to markets that have a proven track record. 60/40 allocation. We are talking about billions returning to the bond market. I haven’t seen that either, just concerns.
The market’s reaction to the three-month rally is more telling than the rally itself, because the bond market is now climbing the “wall of worry” and I love it.
Here’s why.
The bond market entered its recent downtrend in February 2021 when TLT stocks fell below its 20-month moving average. From there, bonds fell like a rock as interest rates began to rise. It was the bond market telling the Fed that inflation was a problem. Remember when the Fed told us that inflation was “transient”?
We have seen several increases of 10-15% over the past three years. Each time, the analysts told us that the fund had been placed in the bond market.
Every time, they were wrong.
This is what I call the “slope of hope.” You don’t buy assets when they slide down the slope of hope, you sell them.
TLT stock and the bond market have consolidated over the past two weeks after a tiring run. It’s normal.
Consolidation occurs just below $100 on TLT. This too is normal, as round numbers tend to act as resistance.
Bottom Line - There's the $100 You Should Watch
A break above $100 on the TLT is going to lead to the next 20% rally in the bond market as Wall Street continues with a tectonic shift back into fixed income investment.
In addition to its rounded nature, $100 also represents the price where that 20-month moving average I mentioned earlier sits.
A break above that trendline puts bonds into a long-term bull market trend for the first time since February 2021. Don't miss the move.
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About the Author
Chris Johnson is a highly regarded stocks and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of points of data into impressive gains for customers.
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