The Treasury Bond And Utilities ETFs Stay Range-Bound While The Junk Bond ETF Nears Risky Level

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Includes: JNK, TLT, XLU
by: Richard Suttmeier
Summary

The Treasury bond ETF is trading between my monthly value level at $119.31 and my semiannual risky level of $121.37.

The Utilities sector ETF is in a trading range between my semiannual pivot at $52.38 and my monthly risky level of $54.44.

The high yield bond ETF is approaching its quarterly risky level at $35.27 below its 200-day simple moving average of $35.41.

The yield on the 30-year Treasury bond set an early-year low of 2.888% on Jan. 4 and remains below its 200-day simple moving average at 3.132% as the Federal Reserve continues to unwind its balance sheet. On Jan. 23, the balance sheet was marked at $4.047 trillion, down $3 billion from a week ago. The total for January is now $11 billion. Following the FOMC meeting on Wednesday, Jan. 30, we will know whether the Fed will suspend reducing the balance sheet.

The utilities stock ETF offers a dividend yield of 3.44%, a reason to maintain a “flight to safety” core holding. The buy level is the “reversion to the mean” at $49.59.

The junk bond ETF bottomed with stocks on Dec. 26, but the upside should be limited to its “reversion to the mean” at $36.18. This ETF has been below its 200-week simple moving average since the week of Nov. 14, 2014.

Here are the daily charts for these ETFs

The iShares 20+ Year Treasury Bond ETF (NYSEARCA:TLT)

The U.S. Treasury bond ETF trades like a stock and is a basket of U.S. Treasury bonds with maturities of 20+ years to 30 years. As a stock-type investment, it never matures and interest income is converted to periodic dividend payments.

Daily Chart For TLT Courtesy of MetaStock Xenith

The Treasury bond ETF ($120.53 on Jan. 25) is above its 200-day simple moving average at $118.60 as a “golden cross” is imminent as the 50-day SMA at $118.61 is rising above the 200-day. The ETF is trading between its monthly value level at $119.31 and its semiannual risky level at $121.37.

TLT has a neutral weekly chart with the ETF above its five-week modified moving average of $119.52. The ETF remains below its 200-week simple moving average or “reversion to the mean” at $124.06. The 12x3x3 weekly slow stochastic reading ended last week slipping to 75.06, down from 77.48 on Jan. 18.

Investor Strategy: Buy weakness to my monthly value level at $119.31 and reduce holdings on strength to my semiannual pivot at $121.27, respectively, and reduce holdings on strength to the 200-week SMA at $124.06.

The Utilities Select Sector SPDR ETF (NYSEARCA:XLU)

Daily Chart For XLU Courtesy of MetaStock Xenith

The Utility stock ETF ($53.32 on Jan. 25) is above its 200-day simple moving average of $52.69 and below its 50-day simple moving average at $54.18. My semiannual pivot is $52.38 with my monthly and quarterly risky levels at $54.44 and $55.87, respectively.

XLU has a negative weekly chart with the ETF below its 5-week modified moving average at $53.69 and above its 200-week simple moving average or “reversion to the mean” at $49.59. The 12x3x3 weekly slow stochastic reading fell to 42.75 last week, down from 45.11 on Jan. 18.

Investor Strategy: Investors should buy weakness to my semiannual pivot at $52.38 and to the 200-week SMA at $49.59 and reduce holdings on strength to my monthly and quarterly risky levels at $54.44 and $55.87, respectively.

The SPDR Bloomberg Barclays High Yield Bond ETF (NYSEARCA:JNK)

Daily Chart For JNK Courtesy of MetaStock Xenith

The junk bond ETF ($35.05 on Jan. 25) is above my monthly and annual pivots at $34.39 and $34.20, respectively, and below my quarterly risky level and 200-day simple moving average at $35.27 and $35.41, respectively.

JNK has a positive weekly chart with the ETF above its five-week modified moving average at $34.63 but still well below its 200-week simple moving average or “reversion to the mean” at $36.18. The 12x3x3 weekly slow stochastic reading ended last week rising to 54.07, up from 40.20 on Jan. 18.

Investor Strategy: My annual and monthly pivots are at $34.20 and $34.39, respectively. Buy weakness to my semiannual value level of $32.74. Reduce holdings on strength to my quarterly level at $35.27 and to the 200-day and 200-week SMAs at $35.41 and $36.20, respectively.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.