While everyone focuses on the S&P 500 finding resistance at its 200-day moving average, bonds are posting their most substantial rally since the early 2020 peak.
Treasuries have represented downside risk for almost two years. We get it. Nobody's wanted bonds!
The long-term Treasury bond ETF $TLT has gained almost 20% since late October. In the process, it registered its largest four-week rate of change in a decade (aside from the covid related volatility).
This is what a momentum thrust looks like:
Notice the previous rallies in mid-2021 and earlier this summer (highlighted in yellow).
Both advances failed to produce sustained strength. It not only shows in price but also in the lackluster momentum readings that followed (highlighted yellow in the lower pane).
The bond rally today paints a different picture – one of strength.
Powerful momentum thrusts tend to occur at significant turning points, adding to our conviction of a potential failed breakdown in treasuries.
We’re monitoring TLT for continued follow-through as investors reach for bonds after one of the worst years in history for US treasuries.
Relative Strength
"Bonds" and "relative strength" in the same sentence… Oh, stop it!
It might sound crazy, as it goes against our recency bias. But, lucky for us, we have the charts.
Check out the bonds versus stocks ratio TLT/SPY:
Treasuries are outperforming stocks in the near term, reclaiming a shelf of former lows going back to April.
