If you feel that stocks are expensive these days, you’re not alone.

The S&P 500 and Nasdaq both broke out to new all-time highs on May 15.

The Dow Jones Industrial Average breached 40,000 points for the first time on May 16.

And what about the meme stock frenzy? Between May 10 and May 14, GameStop rallied an insane 220%.

All of a sudden it feels like it’s 2021 again…

But there’s one corner of the market that’s been quietly going about its business.

This isn’t a flashy market. It’s certainly not something that’s going to get the meme stock gamblers all hot and bothered…

But it’s a market that’s undervalued right now. And in these current conditions, that’s a rare thing.

I’m talking about bonds. Specifically, the iShares 20+ Year Treasury Bond ETF (TLT).

My analysis tells me that bonds are due for a big move. And it might just catch a lot of people off guard.

Let me explain…

Preparing for the Upside

The main driver for the price of bonds right now is inflation expectations.

Simply put, if the market thinks inflation is falling and the Fed will cut rates sooner than later, the value of bonds should go up.

It works the other way around also. If the market doesn’t think rate cuts are coming soon, then the value of bonds will fall.

And it looks to me as though the bond market certainly expects the value of bonds to rise dramatically in the near future.

Let’s look at a chart of TLT below so you can see what I mean.


From October 23 to December 28, TLT rallied over 22%. This move higher is likely the first leg of a new bull market in bonds.

Following this strong move, TLT pulled back 13%, eventually finding a bottom on April 25.

The pullback in TLT traced out a textbook bull flag (two blue lines). Notice how the pullback remained contained between parallel lines.

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This should have been a warning to bond traders that eventually, we would get a breakout of the upper boundary of the flag pattern.

That breakout took place on May 15. What follows next should be a strong move to the upside that roughly mirrors the rally we saw in late 2023.

That gives us a price target of approximately 106.59 in TLT. That’s about where TLT was trading back in May 2023. I’ll keep an eye out to see how this scenario plays out.

Happy trading,


Imre Gams
Analyst, Market Minute