The Treasury Bond And Utilities ETFs Rebound While The Junk Bond ETF Failed At Risky Level

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

The Treasury bond ETF continues to trade back and forth around my semiannual pivot at $121.37.

The utilities sector ETF is rebounding towards my quarterly and monthly risky levels at $55.87 and $56.25.

The high yield bond ETF failed at its quarterly risky level at $35.27 and 200-day SMA at $35.37 last week.

The yield on the 30-year Treasury bond is trading below its 200-day simple moving average at 3.131% and above its Jan. 4 low of 2.888% with my quarterly risky level at 2.863%.

The FOMC tightened monetary policy in January without raising rates. As of Feb. 6, the balance sheet was marked at $4.026 trillion, down $474 billion since the end of September 2017 when it was $4.5 trillion. The total drain in January was $32 billion, assuming the $14 billion unwind of last week was due to maturing treasuries on Jan. 31.

The utilities stock ETF offers a dividend yield of 3.3% which is a reason to hold this “flight to safety” investment as a core holding. The buy level is the “reversion to the mean” at $49.70.

The junk bond ETF bottomed with stocks on Dec. 26, but the upside should be limited to its “reversion to the mean” at $36.14. 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 20+ year 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 ($122.35 on Feb. 8) is above a “golden cross” that formed on Jan. 29 when the 50-day SMA rose above the 200-day SMA with these averages now at $119.93 and $118.66. The ETF is trading between its monthly value level for February at $117.46 and its Jan. 3 high of $123.86 with my semiannual pivot at $121.37.

TLT has a positive weekly chart with the ETF above its five-week modified moving average of $120.32. The ETF remains below its 200-week simple moving average or “reversion to the mean” at $123.97. The 12x3x3 weekly slow stochastic reading ended last week inching up to 74.05 from 73.12 on Feb. 1.

Investor Strategy: Buy weakness to my monthly value level at $117.46 and reduce holdings on strength to the 200-week SMA at $124.97.

The Utilities Select Sector SPDR Fund (NYSEARCA:XLU)

Daily Chart For XLU Courtesy of MetaStock Xenith

The utility stock ETF ($55.68 on Feb. 8) is above its 50-day and 200-day SMAs at $54.15 and $52.89, respectively. My semiannual value level is $52.38 with my quarterly and monthly risky levels at $55.87 and $56.25, respectively.

XLU has a positive weekly chart with the ETF above its 5-week modified moving average at $54.23 and above its 200-week simple moving average or “reversion to the mean” at $49.70. The 12x3x3 weekly slow stochastic reading rose slightly to 48.40 last week, up from 43.58 on Feb. 1.

Investor Strategy: Investors should buy weakness to my semiannual pivot at $52.38 and to the 200-week SMA at $49.70 and reduce holdings on strength to my quarterly and monthly risky levels at $55.87 and $56.25, respectively.

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

Daily Chart For JNK Courtesy of MetaStock Xenith

The junk bond ETF ($35.23 on Feb. 8) 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 $35.36, respectively, after both levels were tested on Feb. 7 as an opportunity to reduce holdings.

JNK has a positive weekly chart with the ETF above its five-week modified moving average at $34.83, but still well below its 200-week simple moving average or “reversion to the mean” at $36.14. The 12x3x3 weekly slow stochastic reading rose to 73.05 last week, up from 65.03 on Feb. 1.

Investor Strategy: My monthly and annual pivots are $34.97 and $34.20, respectively. Buy weakness to my semiannual value level of $32.74. Reduce holdings on strength to the 200-day and 200-week SMAs at $35.37 and $36.14, 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.