The Long Bonds Could Tell HODLers a Story

March 5, 2024

Mish's Daily

By Mish Schneider

Long bonds could be ready to rally closer to 102 as the big test at around 92 held-this means that:

  1. The market anticipates softer yields.
  2. The market at least feels that the rates have peaked unless we see a huge spike in inflation.
  3. The market may not like it if yields get too soft. It could very well have a negative impact with signs of:
    1. risk off
    2. recession
    3. stagflation

Junk bonds on the other hand, are holding up which is solid reason to believe risk on remains for now and dips are buy opportunities.

Until the relationships change (junk underperforms long bonds or SPY underperforms long bonds) we are not concerned too much about the solidity of the market.

Nonetheless, signs are beginning to appear, which should not be ignored.

TLT price cleared over the 50 and 200 daily moving averages and is set to confirm a phase change.

TLT peaked its head above SPY and is not outperforming.

Momentum is also improving, clearing the resistance going back since early February.

This is not the first time TLT has rallied since the end of December 2023.

In fact, it is the 3rd time.

Will the 3rd time be the charm?

Charm for long bonds, but probably not so charming for equities as fear (just look at gold) can start to take over.


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ETF Summary

S&P 500 (SPY) 510 resistance and possible move to 490

Russell 2000 (IWM) Reversal top which could bring this back to 198 quickly

Dow (DIA) 385 support 400 resistance

Nasdaq (QQQ) Another potential reversal top with 411 next major support

Regional banks (KRE) 45-50 range

Semiconductors (SMH) Another potential reversal top with 211 next support

Transportation (IYT Reversal looking back at 276

Biotechnology (IBB) 140-142 resistance 135 support

Retail (XRT) 75.50 support

iShares iBoxx Hi Yd Cor Bond ETF (HYG) 77 big number to hold (still)

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