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Important Chart Development in U.S. Treasury Notes

|Includes: iShares 7-10 Year Treasury Bond ETF (IEF), TLT

Scott Pluschau is a Contributing Editor to the ETF Digest.

Scott was a financial advisor with Citi. His technical analysis report on the Nasdaq Composite Index was featured by Dr. Marc Faber in his June 1, 2011 Gloom, Boom & Doom report. Scott earned his degree in Accounting and Taxation from Pace University. He lives on Long Island with his wife Ilona, daughter Olivia and son Henry.

The 7-10 year Unites States Treasury exchange traded fund, IEF, is coming to a fork in the road. IEF is active and liquid since big money hedges and speculates in Treasuries. I am preparing my trade plan to capitalize on the opportunities that will likely be presenting themselves in 2012.

Treasury securities are the debt financing instruments issued by the United States federal government. Treasuries are perceived to be risk free if held to maturity, but there is purchasing power risk. Will the Federal Reserve’s Quantitative Easing policies stoke inflation? That is an interesting debate for economists and fundamental analysts.

As a trader, I ignore predictions and opinions. My trade plan begins by identifying the current phase of the auction, and then looking for trade locations that give me the greatest probabilities to be on the right side of what the big money is doing.

Let’s take a look at the chart below.