The 30-year Treasury bond future tested key technical support overnight and recovered. This heightens the odds of long-dated Treasuries recovering some of the ground after the Fed’s messages on 5/22 of its expectation to start tapering asset purchases soon. A bounce in Treasuries would present an opportunity: we don’t hold TBT (ProShares UltraShort 20+ Year Treasury) in either of miAnalysis’ ETF model portfolios, but it’s high on our watch list.
TWO SCENARIOS
The sideways price action since last June represents one of two thing: a pause within the larger uptrend or topping activity. The fact that the 30-year yield fell to a hard-to-believe low of 2.452% last July, deteriorating momentum since late 2011 as indicated in RSI averages, and a key change in the Fed’s policy course place odds on a top.
THE PLAY
The daily chart shows a lower shadow formed overnight, confirming chart support at 129’18.5. And the short RSI average dropped to an oversold condition. Look for any upside in Treasuries in the coming days or weeks as an opportunity to position for further price weakness in the intermediate term.
