Friday, January 4, 2013

Yield Curve Steepening Part 2

I thought it may be illustrative to see where long rates may be heading, that is if the signals in the funds discussed in part 1 turn out to be correct. The below chart shows the track of the 30-year treasury bond rate and the price of the TBF or the Powershares 20+ year short treasury fund. The correlation appears fairly tight. This leads me to conclude that a price target around the March 2012 high would result in a long bond rate of about 3.5%.

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Technical Indicators Suggesting Yield Curve Steepening Part 1

I am seeing some interesting dynamics in the ETF's that track the treasury markets, and specifically a yield steepening event looks to be underway. First the low end of the curve.....

Not much going on here, and no indication the trend will break in any direvtion. However, lets look at the long end of the curve. Below I show the the Poweshares 20+ year ETF (ticker tlt) and its short equivalent (ticker tbf).

What is interesting in these charts is the price/volume charactrristics. First the TLT is showing signs of breaking down, noting that the price of the fund has broken the September low on somewhat elevated volume. This while the MACD, RSI, and money flow metrics are breaking down. More interesting is the chart of the TBF. The price of the is gaining strength while volume is on the up swing. I also note that next high volume region on the TBF is the March 2012 high, where there is a gap in the price. Gaps have a tendacy to be filled and this along with the price/volume setup makes me think it will occur sooner rather than later.

Still Not Time to Buy the Gold Stocks- Weekly All that Glitters

I guess the old adage "all good things to those that wait" fits very well here. Neither the price of gold or money supply have moved enough over the course of the last few weeks to make that much of the difference in the gold stock timing metrics. All three metric time periods I calculate remain in decent buy zone positions, with each coming in with results below -1.3. In fact, the forward historical performance is better than the average buy-and-hold performance after seeing measures at our below this level. That said, I remain on the sidelines due to wait I see as negative technicals in the gold markets, essentially amounting to what I see as signs of distribution in the market. In any event, the following are the latest results from the timing models.

3-month model -1.4

1 year model -1.3

6-month model -1.3