Dow Jones Industrial average lagged behind in negative territory, shedding 0.21% on the day. Fear in the markets has eased up considerably as evidenced by the Volatility Index, which fell under 30 for a second day in a row. Gold drifted sideways much like equity markets, settling near $1,750 an ounce as the trading session drew to a close [see Gold And Silver In A Correlation Bubble?].
Investors on Wall Street will shift their focus onto the latest jobs report when it debuts later today. Analysts are expecting for the unemployment rate to remain unchanged at 9%, while any surprises could lead to volatile trading, making the iShares Barclays 20 Year Treasury Bond Fund (NYSEARCA:TLT) our ETF to watch for today [see Government Bonds ETFdb Category Report ].
U.S. Treasury bonds have been on a tear ever since the downgrade of America’s credit quality in early August. In fact, since August 1st, TLT has gained close to 20%, while domestic equity markets, as represented by SPY, are down 3% during the same period. TLT recently hit a fresh all-time high at $125.03 a share on 10/4/2011, although the fund has endured a correction since summiting its most recent peak [see TLT Returns].
Despite the stellar equity market performance in October, when considering the above chart, it’s apparent that TLT has been quite resilient, managing to give up only a little bit of ground as demand for “risky” assets soared [see UBS Launches Risk On /Risk Off ETNs]. TLT has taken on safe haven appeal once again in recent weeks as resurfacing Italian debt woes have paved the way for panic selling. This long-term bond ETF has thrived amidst the ongoing chaos and it remains appealing from a technical perspective as well, seeing as how TLT is trading well above its upward-slopping 200-day moving average (yellow line).
If the U.S unemployment report comes in better-than-expected, investors may find themselves in a buying frenzy, likewise, creating selling pressures across the fixed income market. In terms of downside, TLT may dip down to support near $115 a share, while a close below that mark would put the $110 level in sight. On the other hand, TLT may once again take on safe haven appeal if the latest unemployment report paints a gloomier than expected picture [see Ten Best ETF Performers Over The Last Five Years]. In terms of upside, TLT may very well reclaim the $120 level, although short-term traders ought to consider locking in profits seeing as how there is major resistance at the $125 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.
Written By Stoyan Bojinov From ETF Database Disclosure: No Positions
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