Monday, May 23, 2011

Treasury Tuesdays

Last week I wrote the following about the Treasury market:
My analysis of the Treasury market has not changed. The market is moving higher, but keep the stops tight. Also remember that yields are dropping, and we're getting near levels when yields shouldn't be moving much lower without a change in the fundamentals. I'd still use 2.75 on the 10 year as the absolute lowest yields can go in the current environment.
Let's go to the charts:

On the longer term chart, notice that prices are now above key resistance areas and have a fair amount of room to run higher.

The shorter chart shows that with the exception of a dip to the 20 day EMA, prices remain in a strong uptrend. All the EMAs are moving higher and the shorter EMAs are above the longer EMAs. Prices are using the EMAs for support rather than resistance -- another sign of a rally.

The underlying techncals are pretty strong, with the A/D moving higher and the CMF confirming the inflow of money into the market. There is some weakness with the MACD, as it might be close to giving a sell signal.

The Treasury market is benefiting from concern about the stock market and the EU situation. Interestingly enough, there does not appear to be any concern on the part of bond traders regarding the budget situation in Washington. However, as I mentioned last week, remember that on the other side of price is yield. I would use 2.75% as the possible low on the yield front, but that's simply a decent round number to use.

It's important to remember that on the fundamental front, the Treasury market is the primary market to invest in right now. As such, it's benefiting from the increased concern about the economy and the EU situation.