On Friday the US 30 Year price broke below support. The US 20, 15, and 10 years are following close behind and are only a whisker away from breaking below support. We believe that the 20, 15, 10 years (not to mention the 5 year and less) will break below support over the coming days. The action in the US 30 Year is very significant and has bullish repercussions for equity and commodity markets and bearish implications for the USD Index.
To trade the US Treasury market via ETFs one can (assuming like us you are bearish) trade TBT, which goes up by twice the amount that the US 20 and 30 year Treasuries fall. The option market on TBT is also very liquid and goes out 2 years.
It is interesting to note that the breakdown in US Treasuries is coinciding with strength in the US high yield bond market (junk bonds), which suggests that the break-down in US Treasuries is a “real” move and not just random “noise”…….remember everything in the world is interconnected. Often what seems as merely “noise” or “volatility” is in fact the real thing but cleverly disguised!
Whilst there is continued strength in the Junk Bond market and weakness in US Treasuries don’t expect any material weakness in equity markets.
They keep coming, more and more bullish breakouts by the day! We have breakouts (moves above significant resistance) in Oil Services (OIH), Steel (SLX) and the broader materials group (XLB). The breakout in XLB is very important.
Notice how close MOO and KOL are from breaking out:
And there is XLB which includes: mining, steel, chemicals, paper etc. It has made a very important breakout:
