the Trade-Radar + TradingStockAlerts blog

Bonds got clobbered today, going in the opposite direction as stocks. I've been watching the iShares Barclay's 20+ Year Bond Fund (TLT) for a while and wondering if the rally was getting tired. Today's action suggests TLT is really pooped and that perhaps the rally is over for now. Let's go through the chart: Here are six reasons that suggest the rally may have run its course: Big gap down today on decent though not extraordinary volume Over the last couple of weeks, Slow Stochastics have been trending down while TLT was trending up. This implies TLT was running out of steam. Slow Stochastics have broken down in a bearish manner now with the value dropping below 50. MACD has also been trending down slightly while TLT was trending up. MACD has now failed to climb above its signal line (the red line) for a couple of weeks and, after today, is noticeably pointed downward. Wilder's DMI just showed a crossover where the -DM (bearish Directional Movement) indicat...

Numerous bloggers and analysts have declared that the latest bubble seems to be occurring in the bond market. There could be some truth to that opinion. Take a look at the following chart of the iShares 20+ year Treasury Bond Fund ETF (TLT): This is definitely looking bubbly. The yield on the 30-year bond has now fallen to 3.2%, the lowest on record going back to 1977. This is unprecedented. When this bubble bursts, the individual investor now has the tools to benefit. ProShares offers an ETF just for this purpose, the UltraShort Lehman 20+ Year Treasury (TBT). The chart is presented below: The ProShares ETF has been available only since May of 2008 but it looks like the timing is perfect. Investors have not been afraid to trade this ETF, with volume today, for example, running over 2 million shares. The ETF has plunged as TLT has rocketed upward and gets cheaper by the day. Right now, bonds are benefiting from the flight to quality trade. Each time another shoe drops in the stock mark...

"The cycle repeats viciously While I smile outwardly" -- Bracken Courage from the song The Cycle When it comes to the ProShares ETFs, most of the attention is devoted to the ones that track various stock-related indexes such as the Dow, NASDAQ, S&P 500, Russell 2000 as well as a number popular sector indexes such as financials, REITs, tech, etc. Lately, the ETFs that track oil are getting some action, too. What many individual investors may be missing is that the bond market, in particular the Treasuries, is not doing especially well. And ProShares offers a way to take advantage. Bond market fundamentals -- There are several reasons for the situation in the bond market. The one that most investors are worrying about is inflation. Bonds typically decline in price as inflation increases or as the perception of impending inflation increases. This is because investors know that the typical Fed response to inflation is raising interest rates. This implies that bonds issued in ...

As the credit crunch has unfolded, we have seen municipal bonds fall in value as bond insurers have weakened and concern mounts that mortgage problems will impact the ability of municipalities to collect tax assessment revenues. Merrill believes this is somewhat overdone and that the entire municipal bond sector has been tarnished though only isolated instances of problems are likely to occur. Without more precise risk assessment to identify those municipalities that will or will not suffer, investors will be throwing out the baby with the bath water. This implies that national muni closed-end bond funds are selling at deeper than average discounts to their net asset values. The chart below shows the yield ratio between AAA-rated municipal bonds and 10-year Treasuries. The ratio is currently at a multi-year high. Merrill expects the 10-year Treasury yield to fall to 3.5% by mid-2008, supporting an expectation that the relative yield of munis will remain at a higher than average level. ...