Tuesday, December 30, 2008

Treasury Tuesdays

Click for a larger image

Let's start with the long end of the curve. From September through December, the TLTs were trading in a slightly compressing triangle. Then they went parabolic, rising from 98 to 120 -- a gain of 22.44%. That type of gain is literally unheard of in the fixed income world and indicates the Treasury market is in a bubble.

Click for a larger image

The IEF (7-10 years) also rose through important technical resistance right around the 92.50 level and is now 7.5% above the high points of its 9 month trading range.

With both of these charts, notice the extremely sharp increase in prices that's happening right now; these are large jumps for a fixed income security. Also note the SMAs -- they are all sharply up indicating traders are bidding these securities up sharply.

Click for a larger image

On the short end of the curve, first notice the rise since the end of June. The rally has been strong and continuous.

On the three month chart notice the following:

-- Prices used the 10 and 20 day SMAs as technical support for the last three months. Now prices have moved below that level.

-- The 10 day SMA is about to cross below the 20 day SMA

These are all initial moves, and could easily be reversed with a week or so on contrary action, so don't bet the farm on these moves. However, they do indicate times might be gearing up for a change.