The so-called “risk-free” assets haven’t been so risk free this week.
U.S. Treasury bonds have been crushed – falling 2.5% in the past two days. That’s on top of a 1.5% drop from last week.
Stock traders probably don’t view that move as a big deal. After all, stocks routinely move around much more than that.
But, U.S. Treasury bonds are supposed to be stable, even the “risk-free” assets. They’re the investments that are supposed to help widows and orphans sleep well at night. And, the action over the past two weeks is probably causing some nightmares.
Take a look at this chart of the iShares 20+ Year Treasury Bond ETF (TLT) – which tracks the action in long-term Treasury bonds…
This week’s decline has pushed TLT below its August low. It looks like it’s headed for the support line of its June low at about $155 per share. Treasury bond investors better hope that support holds, because the next support level is all the way down at the March low near $143.
It’s worth noting that the Commodity Channel Index (CCI), a momentum indicator that helps to identify overbought and oversold conditions, is more oversold now than at any other time this year. (To learn more about various technical indicators and terms – check out our new Free Resources tab on the Jeff Clark Trader website.)
Treasury bonds managed to bounce fairly hard the previous two times the CCI reached oversold levels. So, it’s possible that this week’s volatility in the Treasury bond market is nothing more than a buying opportunity for widows and orphans.
But, it’s also possible that this action marks the start of the next move higher for longer-term interest rates – something we pointed out back in August. And, if that’s the case, then Treasury bonds have a lot farther to fall in the longer term.
Any short-term bounce is simply an opportunity to get out.
Best regards and good trading,
Jeff Clark
P.S. Regardless of what kind of market we’ve been in, I’ve always used just 3 simple stocks throughout my career to help me make money and retire early… and I believe my method can help others achieve the same.
That’s why I created my Jeff Clark Trader Masterclass to show everyday folks how they only need to worry about trading these 3 stocks in order to see large gains… even during tough times like the current climate.
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Reader Mailbag
A member of our Jeff Clark Trader Masterclass, Pam, thanks Jeff for his trade recommendations, and her subsequent success…
Hi, Jeff! I’m new to trading and started my “portfolio” with only $2K. In my first month, I made $500 using your recommended options, and I’m having so much fun proving all the option nay-sayers wrong! I’m putting my gains back into the account and may actually retire one day with my “fun money”!
Thank you, and warmest wishes.
– Pam
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