The net result of the volatility in the bond market last week, as the crowd digested strong Q2 GDP, a benign FOMC statement and a disappointing July labor report, is a long opportunity in TLT (iShares 20+ Year Treasury Bond), something I’ll be advising clients about at miAnalysis.
The 30-year Treasury bond futures contract slightly undercut its 7/8 low but attracted aggressive buying, resulting in a substantially higher low in the fast RSI average after oversold conditions were reached in June and July. This suggests a floor may be in place. If the contract managed to rally past 136, a breakout from a double bottom would be confirmed and the door would open to a run to chart resistance at 139 22/32.
The technical picture for TLT is much less clear. Price undercut its prior low by a higher margin. And RSI averages don’t show a clear improvement in momentum. But TLT should move with the 30-year Treasury bond future. A stop loss could be placed somewhere below the Thursday, 8/1 low of 105.00. This compares favorably with reward potential of 114.62, based on chart resistance taken from the March low.
