Interest Rates May Have Already Peaked (TLT)

Technical analyst Chris Kimble takes a close look at recent interest rate trends and concludes that bonds may be nearing a turnaround.

Above looks at 2 & 5-year yields over the past 30-years. The rally over the past couple of years has both of them testing 25-year falling resistance line (A) at each (1). While testing this long-term resistance, the insets reflect potential reversal patterns might be taking place this week.

While 25-year resistance is being tested, momentum is at levels seldom seen in the past quarter-century. In fact, rates were closer to highs than lows when momentum was this high in the past.

Below looks at the polar extreme in the rate world, Zero Coupon Bond ETF (ZROZ)-

ZROZ tested dual support and the apex of a bullish falling wedge of late at (1), as momentum was low and possibly creating higher lows. Currently, ZROZ is working on a breakout at (2), which would suggest at least a short-term high in yields/lows in bonds could be at hand.

Full Disclosure- Members bought ZROZ a couple of weeks ago at it appeared to be attempting a bullish falling wedge breakout.

The iShares Barclays 20+ Yr Treas.Bond ETF (TLT) fell $0.66 (-0.55%) in premarket trading Monday. Year-to-date, TLT has declined -5.27%, versus a -3.30% rise in the benchmark S&P 500 index during the same period.

TLT currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #12 of 28 ETFs in the Government Bonds ETFs category.


This article is brought to you courtesy of Kimble Charting Solutions.