Tuesday, May 3, 2011

Treasury Tuesdays

Last week I wrote the following about the Treasury market:

I'm treating the current action as a consolidation range and would wait to make a trading move until after prices convincingly choose a direction. For the IEFs, that would be a move above 94-94.5 or a move below 92. For the TLTs, it would be a move above 93.5 or a move below 90.

The long end of the curve is still contained by the 200 day EMA -- a technically important development. In addition, the Treasury market is still in a trading range. Until we see a convincing move in either direction, I would not be trading this market.

As with last week, very little has occurred this week to change my opinion.

The IEFs have hit the 94.5 price area, but retreated. Also note the line chart helps to further clarify where prices are; prices have been meandering and fluctuating around various levels, but there has been no strong move in either direction.

The TLTs are right at the 93.5 level. But notice they have been rebuffed two times now. Also note the declining volume, indicating a lack of excitement or momentum.

Notice how the IEF prices have been fluctuating around the 200 day EMA along with their respective EMAs. All the shorter EMAs are moving higher and the shorter are above the longer. However, the EMAs are still around the 200 day EMA.

After hitting resistance at the 200 day EMA, prices have moved beyond that level only to stall. While the shorter EMAs are moving higher, they are below the 200 day EMA. Also note the lack of volume, taking away from the advance.

Overall this is still an undecided market. The EMAs are jumbled and prices have been floating around the 200 day EMA. What is interesting is that despite the continued calls of rampant inflation, prices have not sold off. In addition, at this point in the stock market rally, Treasury prices would typically start to sell off as traders began to anticipate the Fed's first post recession tightening move. But with the Fed still in a very easy interest rate stance, that will not be happening anytime soon.