Tuesday, March 31, 2009

Treasury Tuesdays

The main issue in the Treasury market right now is the Fed's purchase of Treasury debt. That has placed a de facto floor underneath Treasury prices for the foreseeable future. The long bar (you can't miss it on this chart) occurred when the Treasury announced the plan. Since that announcement, prices have sold off to the 10 day SMA but are now using the 10 day SMA as technical support. In addition, the 10 day SMA has crossed over the 50 day SMA and the 20 day SMA has also crossed over the 50 day SMA.

It's important to remember that SMAs are coincidental indicators, meaning they occur at the same time as the event they are describing. If you want a moving average that is more predictive -- or at least more important relative to the current prices, use the exponential moving average:

Notice that on the EMA chart, the 10 and 20 day EMAs have already moved through the 50 day EMAs.