Monday, June 27, 2011

Treasury Tuesdays

Last week, I wrote the following about the Treasury market:
While I'm not seeing anything to indicate a mass exodus from with security, I do think the rally is over for now. I'd take profits if you haven't already.
My concern for the rally was based on two things. First, the MACDs of both the IEF and TLTs were giving sell signals. In addition, the charts of both were starting to break down. The IEFS had dipped below support followed by a subsequent rally and the TLTs had broken their uptrend and were moving sideways.

Over the last week, the Treasury market has continued to benefit from Greece fallout and concern over the US economy.

On the daily chart, notice the IEFs are still in an upward rally and have broken through resistance to make a further advance. All of the EMAs are bullishly aligned -- all are moving higher, and shorter are above the longer and prices are using the EMAs for technical support. Also note the slight uptick in volume for the last few weeks, possibly indicating a buying climax.

Notice that the A/D line -- after making a strong advance, hasn't increased for a few weeks. This lack of volume is confirmed by the CMF. The MACD indicates momentum is decreasing.

The long end of the yield curve is still moving sideways and has again broken below the EMAs. Yesterday's price action was also a big move lower. Note the underlying technicals are giving way to bearish developments. The A/D line tells us new money is not flowing into the market. The CMF is moving lower as well, and the MACD shows a distinct lack of momentum.

The fact that the long end of the curve didn't follow the belly higher is interesting. That and the continued deterioration in the TLT's technicals tells me the long end of the curve is selling off -- or at least holding even for awhile. I'm not convinced the IEFs are going to maintain a strong rally here, largely because the long-end of the curve is not following through. As such, I don't see the IEFs current move higher continuing. That would analysis would change if the TLTs break higher to new levels.