See figure 1 a weekly price chart. The 40 week moving average (i.e, red
line) is heading higher, and prices are trading above key pivot points, which
are areas of support (buying) and resistance (selling). In essence, this
is a "beautiful" chart with lots of momentum (i.e., note the breakout gaps).
If this were a stock, the analysts and pundits would be all over the "breakout" ---blah,
blah, blah.
Figure 1. Price Chart/ weekly
But figure 1 isn't a stock, it is the yield on the 30 year Treasury, and the
chart has been turned upside down. What I hear and read is this move in Treasury
bonds isn't sustainable. A sub 3% yield isn't possible, but isn't that what "they" said
about a sub 4% yield? Which happens to be in the rear view mirror.
People still don't believe, and they are not interpreting the significance
of the price action correctly. Maybe if this were a stock people would be wowed
by the price action. But they aren't. For the record, figure 2 is a weekly
chart of the yield on the 30 year Treasury bond (symbol: $TYX.X). Are the low
yields of late 2008 the next stop?
Figure 2. $TYX.X/ weekly
In up coming commentaries, I will have more on why I think this move is even
more sustainable than most analysts are currently anticipating. I last wrote
about this secular theme on July 8, 2010: "The
Case For Treasury Bonds".
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