Roger Knights

TLT Has Momentum

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...