Tuesday, March 16, 2010

Treasury Tuesday

First, let's note where we are in the big (multi-year) cycle. The IEFs are in the middle of a giant head and shoulders pattern. Most importantly, prices are on the right side, meaning a move lower (below the neckline) is possible. Fundamentals back up this situation. The US is having to float a lot of debt to finance it's budget deficit. More supply = lower prices.

A.) Prices sold off in a big way in December, falling nearly 5% in a month.

B.) Prices bounced back to the 50% Fibonacci retracement level.

C.) Is this a double top from the bottom at the end of last year?

For the last few weeks prices have been gravitating around the 50 day EMA, not really willing or wanting to make a firm commitment in either direction.