From False Moves Come Fast Moves – US Treasuries Edition
- Posted by JC Parets
- on August 24th, 2011
The destruction in US Treasury Bond prices over the last couple of days has sent bond yields and stock prices soaring. Stocks and Bonds have been inversely correlated for some time so last week we took a look at what would happen if Treasuries rolled over. Well Bonds went on to make new highs, briefly, before they started getting crushed this week. This brief new high that didn’t hold could be the the Bull Trap necessary to send bond prices even lower. These false moves can create some vicious trading opportunities. In this case, the stock market is certainly benefiting from it.
Here are two Treasury Bond ETFs that show what is happening:
The opposite is happening in 10-year Treasury Bond yields:
We’ve been watching these Bond prices looking for a big sell-off in this space as a head’s up for a stock market rally. The correlation is very powerful. When money comes out of one asset class it needs to go else where. In this case, we are seeing the money flow out of the “save haven” of United States debt and into more “aggressive” areas like US Stocks.
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J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) and is a member of the Market Technicians Association. More
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