(Tim sez: please note this was written by Gary yesterday, so adjust time references accordingly)
In honor of our friends at Treasury selling their bonds (more of our
unpayable debt) yesterday and today, and in light of the fact that it
took higher rates (bonds across the board tanked yesterday) I thought I
would take a look at some iShares T-bond charts.
Up today, the
government peddles 32b
worth of 7 year notes, so the iShares 7-10 year treasury fund IEF
gets the main chart. In the lower panels are the IEI 3-7 year and TLT
long bond funds.
Before we look at the chart, a question; what
exactly does it tell us when the inflators attempt to find buyers for
their bonds (def- 1: a binding security; firm assurance: My word is my bond. 2: a sealed
instrument under which a person, corporation or government guarantees to
pay a stated sum on or before a specified day. 3: any written
obligation under seal) and with long term interest rates already
approaching 'big picture' tolerance levels (that would be the err, barn
door) rates rise strongly on auction day?
It tells me there is a
problem with a lack of confidence in the US treasury (no shit?), but
that the policy of low short rates (despite market pressures on the
freer long end and despite economic/asset recovery) and a firm 'inflate
or die' attitude to continue funding this macro experiment continues
unabated. They are pushing the tachometer into the red in a tacit
statement of "We are America, and what the F are you going to do about
it anyway?"
Is it possible that the world – given the unraveling
of the euro amid the failed experiments popping up over there with
greater frequency – is submitting to the US and the too big to fail
owner of the reserve currency simply knows it can take and take and
take? And the US' subjects just line up for more, albeit at higher
rates of interest?
Hey look, I am just a blogger trying to figure
out the meaning of some very confusing questions and conflicts, just
like you. So on to the chart. What I find here is surprisingly bullish
– for treasuries (and for the still open deflation impulse scenario).
7-10
year treasuries are in a nice symmetrical triangle, which is a
continuation pattern. No breakout yet, but if the break is to the
upside, expect a strong move with upside follow-through.
The next
panel is the home of the 5 year treasury bond and its pals on the short
to medium end. Ascending triangle – bullish continuation as long as
lower line holds. A break of the top line brings on a strong move
higher. It's just about done coiling and will break one way or the
other shortly.
Finally, in the lower panel is our long bond
proxy, the iShares TLT 20+ year fund. Below the lower trend line we go
into Wonderland, uncharted inflationary territory. But what's this?
TLT has creeped out of the weekly downtrend while holding the 'barn
door' line. There is little downside tolerance left. We are there
folks; on the cusp of having some big ongoing questions answered.
Recall that if you flip TLT over, it looks like a bullish inverted head
& shoulders. Talk about drama? —Gary
