ChartWatchers

TLT IS LOOKING OVER THE CLIFF AGAIN

Chip Anderson

Chip Anderson

President, StockCharts.com

It's beginning to look like déjà vu all over again for the iShares Lehman 20+ Year T-Bond Fund (TLT). This bond ETF has been in a steady uptrend 20+ since May as rates have fallen. May just happens to coincide with the Fed's first interest rate hike. Rates have risen at the short end of the curve (<2 years), but declined at the long end and TLT represents the long end (>10 years).

As noted in last week's report, TLT looks vulnerable to a pullback, consolidation or even a sudden reversal. This bond ETF traded to the upper trendline of a rising price channel and formed a bearish engulfing this week. Notice that a large bearish engulfing pattern foreshadowed the Jun-03 peak and an island reversal foreshadowed the May-04 reversal.

As the recent past shows, TLT can fall fast and the employment report is due next Friday. The last two declines erased 15% and 12 % in around two months (16-Jun-03 to 14-Aug-03 and 17-Mar-04 to 13-May-04). These are big moves for bonds and it was difficult to get out of the way as a virtual free fall occurred. Weak employment numbers and a softening economy have propped up TLT for the last few months. Recent GDP numbers show a firm economy and a strong employment report would surely send TLT tumbling further.


Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More