Tuesday, August 4, 2009

Treasury Tuesdays

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It's important to get a historical perspective on where the market is. While there is concern about the recent sell-off, notice that prices are about where they were in 2008. Also remember that 2008 was the middle of a recession -- a time when people naturally move toward the safety of the Treasury market. This means 2008 prices were not historically representative -- they were to high.

On the 3 month chart, first notice that prices are below the 200 day EMA. This indicates we're in a bear market. Also notice that all the EMAs are moving lower and the shorter EMAs are below the longer EMAs. Finally, prices are below all the EMAs -- the most bearish alignment possible.

And just as a point of comparison, notice the money is still flowing into high-grade corporate bonds and the junk bond market.

In short, these charts demonstrate that the risk appetite is moving back into the market.