From the desk of Steve Strazza @Sstrazza
Our Top 10 report was just published. In this weekly note, we highlight 10 of the most important charts or themes we’re currently seeing in asset classes around the world.
Will Bonds Follow The Path Of Bullion
A few weeks ago, we put out what you could call a “lower conviction” trade idea in Gold Miners. The reason we did this was simple and boiled down to two things: 1. The risk/reward profile; and 2. The primary trend. The prior was simply too good to ignore as price tested a formidable level of former resistance turned support. And this was taking place within the context of an underlying uptrend. Fast forward to today, and that trade has worked out beautifully (see lower pane).
What’s interesting is that Treasury Bonds are now setting up with a very similar chart formation after grinding steadily back down toward the 2016 and 2019 highs, where prices are now. The question that remains is whether buyers dig in and defend this key former resistance level near 113. They have so far… And just like GDX, the risk/reward here is too good to pass up and Treasuries are in a structural uptrend. We’re buyers above 113 with a target of 123 over the next 1-3 months.
A near-term bid in bonds would make sense if we’re right about entering an increasingly volatile and choppy environment for risk assets.