The Treasury Bond ETF Rebounds, Utilities Set New High As Junk Bonds Slip

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

The Treasury bond ETF held its 200-day simple moving average at $118.93, then closed Friday above its semiannual pivot at $121.37 with my quarterly risky level at $125.62.

The Utilities Sector ETF set a new all-time high last week at $57.70 with my monthly pivot at $56.90 and my annual risky level at $58.98.

The High Yield Bond ETF remains below its “reversion to the mean” since Nov. 2014 with this 200-week SMA at $36.06. Weakness on Friday held my quarterly pivot at $35.27.

The yield on the 30-Year Treasury Bond held its 200-day simple moving average at 3.120% on Monday as the weakness in the global economy returned U.S. Treasuries to “flight to safety” status. Meanwhile, the Federal Reserve continues to tighten monetary policy by unwinding its bloated balance sheet.

The utilities stock ETF offers a dividend yield of 3.19% which makes XLU less attractive as a “flight to safety” investment.

The junk bond ETF continues to rally with stocks, but the upside should be limited to its “reversion to the mean” at $36.06. 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 20+ Year Treasury Bond ETF (NYSEARCA:TLT)

The U.S. Treasury 30-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 Refinitiv XENITH

The Treasury Bond ETF ($121.57 on March 8) is flat so far in 2019 after setting its 2019 high of $123.86 on Jan. 3. This ETF is up 8.6% from its $111.90 on Nov. 2. TLT has a neutral weekly chart with the ETF above its five-week modified moving average of $120.63. The ETF remains below its 200-week simple moving average or “reversion to the mean” at $123.86. The 12x3x3 weekly slow stochastic reading declined to 62.53 last week down from 69.92 on March 1.

Investor Strategy: Buy weakness to my monthly value level at $116.15 and reduce holdings on strength to the 200-week SMA at $123.86. My semiannual pivot is $121.37 with my quarterly risky level is $125.62.

The Utilities Select Sector SPDR Fund (NYSEARCA:XLU)

Daiy Chart For XLU Courtesy of Refinitiv XENITH

The Utility Stock ETF ($57.55 on March 8) is up 8.4% so far in 2019 and is 12.9% above its Dec. 26 low of $50.81. XLU has a positive but overbought weekly chart with the ETF above its 5-week modified moving average at $55.87 and above its 200-week simple moving average or “reversion to the mean” at $49.95. The 12x3x3 weekly slow stochastic rose to 82.07 last week up from 73.93 on March 1 moving above the overbought threshold of 80.00.

Investor Strategy: Investors should buy weakness my semiannual pivot at $52.38 and to the 200-week SMA at $49.95 and reduce holdings on strength to my annual risky level at $58.98. My quarterly and monthly risky pivots remain at $55.87 and $56.90, respectively.

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

Daily Chart For JNK Courtesy of Refinitiv XENITH

The Junk Bond ETF ($35.40 on March 8) is up 5.4% so far in 2019 and is 7.5% above its Dec. 26 low of $32.92. JNK has a positive but overbought weekly chart with the ETF above its five-week modified moving average at $35.19 but still below its 200-week simple moving average or “reversion to the mean” at $36.06. The 12x3x3 weekly slow stochastic reading rose to 91.34 last week up from 89.81 on March 1. With the reading above 90.00 JNK has become an “inflating parabolic bubble”.

Investor Strategy: Buy weakness to my semiannual value level of $32.74 and reduce holdings on strength to the 200-week simple moving average at $36.06. My semiannual and quarterly pivots are $34.20 and $35.27, 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.