TLT Has Momentum

Yesterday's rally in the general markets surprised me in point total but the volume is typical of holiday trading and nothing really has changed in my opinion. I will hold off taking any short positions until the new year just in case bulls want to push this market higher so the main sectors I’m going to focus on are gold, silver and bonds. Since tomorrow is a shortened day I’m going to hold off doing extensive research and save that for the new year.

This brings me to TLT, which has one of the strongest momentum charts out there and you can see it started off the day in the red and spent the rest of the day moving higher on increasing volume. This is a good sign that this issue wants to head higher. Looking at the chart it looks like it’s moved too much to take a long position, but these chart patterns have a tendency to move a lot higher than anybody can expect.

Comments

[User 68127:]

Using a momentum strategy and technical analysis to invest in the 10-year? Not a good idea.

The already low yield can only go to zero, limiting your upside. Selling or shorting the spike would be a much better risk/reward proposition.

2008 Dec 31 01:10 PM

[sheridan:]

I've been reading this guys commentary and he's an amateur.
Ignore his columns. Just look at TLT today.

2008 Dec 31 01:39 PM

[jepittman:]

Amateurs can be right too. Judge his idea not his age or experience. That said I believe there is too much risk in tlt for me. These straight up advances too often mark the end of massive moves. When the worm turns the downdraft can be nasty. Look at the oil chart.


On Dec 31 01:39 PM psheridan wrote:

> I've been reading this guys commentary and he's an amateur.
> Ignore his columns. Just look at TLT today.

2008 Dec 31 04:39 PM

[Hmm?!:]

I like the guy too. jepittman is right, just give him some time.

I like to see what the short-term traders are looking at, to get longer term entry points and ideas from the other side.


On Dec 31 01:39 PM psheridan wrote:

> I've been reading this guys commentary and he's an amateur.
> Ignore his columns. Just look at TLT today.

2008 Dec 31 06:05 PM

[Jeff Pierce:]

TLT did do an about face today and I'm glad that I didn't buy any. However before today the chart was acting like it wanted to go up. While I am young I am not an amateur by any stretch as I've been trading for 10 years now so thanks for the support from jepittman/hmm.

Psheridan, for you to judge somebody by their picture says a lot about your character so if you don't have anything positive to say please keep your comments to yourself. Better yet, start a blog, and let everybody track your trades openly on Covestor and your performance and we'll see how you fair.

Happy New Year to all on SA.

2008 Dec 31 09:33 PM

[Roger Knights:]

About a week ago a poster on SA argued that the rise in treasuries was due to institutional window dressing for their 4Q reports, implying that TLT would sell off in January.

Jan 01 07:53 PM

[Roger Knights:]

PS: I went to Bigcharts and took a look at the indicators on the TLT chart that includes the action from Wednesday, the 31st. The relative strength line turned sharply down from the overbought area (80); the MACD lines crossed over at a high level; and the fast stochastic line sharply crossed the slow one. These are all quite bearish.

Jan 01 08:09 PM

[Kunst:]

Interest rates are at record lows while the US government floods the world with dollars. Higher interest rates are extremely likely in coming months. TLT has had its day, a nice one but just about over now. I am in TBT, the inverse of TLT.

Jan 03 01:18 AM

[fsckr:]

December technicals be damned, I'd short this baby all the way back to its interim range in the 100-105 with a stop at 120.

Jan 03 06:35 PM

[anarchist:]

My read on this is that Jeff is basically a day-trader. His call TLT seems to have fizzled (short term hindsight) but one stock a portfolio does not make. I went to Covestor and I will say that I wish my performance over about any time-period was as good as Jeff's.

Jan 04 12:30 PM

[Jeff Pierce:]

Bang on the money anarchist except I'm more a swing trader as I often hold positions overnight. The problem in my analysis is that I can change my mind the next day depending on how the charts play out. If anybody thinks I'm still bullish on this chart they're wrong.

In fact, the next day's sell off after I posted this article had me changing my stance on TLT. Problem is, unless you read my blog or follow me on twitter you wouldn't know that. Seeking Alpha on selects certain articles of mine to put on their site.

Best of luck to everybody.

Jan 04 03:51 PM

[Roger Knights:]

In one of my two comments above, written the day after this bullish article was posted, I wrote:
"The relative strength line turned sharply down from the overbought area (80); the MACD lines crossed over at a high level; and the fast stochastic line sharply crossed the slow one. These are all quite bearish."

Some cluck saw fit to give me a thumb's-down for that observation, which has a month later (as of Feb. 2, 1:18 PM ET) been vindicated. TLT is now105, down over 15%, in a trend that is a near-mirror-image of its rise on the chart above to 122. It’s likely, IMO, to fall below 100 soon.

I wouldn't have come here to say "I told you so" except that the author, despite this failure, last week made the invincibly ignorant statement, "The charts don't lie." He can call it what he will, but charts can certainly deceive, as this example demonstrates. A more sophisticated and experienced chartist, whom I admire for his willingness to acknowledge the imperfections of his tool, wrote a book in which he took care to demonstrate, alongside every chart-pattern that worked out, a chart showing a failure of that pattern to perform. I.e., a case where the chart lied. (The book is "Candlestick Charting for Dummies," by Russell Rhoades.)

Charts can be helpful, but they have to be read in conjunction with fundamentals (which indicated that upside was limited and downside huge in TLT), and with other technical indicators, such as the ones I cited. To imagine that a stock is a physical object that has the property of momentum is to commit the “fallacy of misplaced concreteness” (Whitehead), otherwise known as reifying.

Here's a link to a Bloomberg article today on the sharply rising yields on Treasuries:
www.bloomberg.com/apps...

Feb 02 01:42 PM