There are two trades in this market: the risk trade and the non-risk trade. The risk trade is in equities and all the other assets, like commodities, real estate and emerging markets, that have become highly correlated to equities. The non-risk trade is in bonds. This works when equities don't. With the bounce in equities sputtering (but not having rolled over yet), Treasury bonds are looking attractive.

After much struggle and angst, I managed to get the "call" in Treasury bonds correct. This appears to be a secular, sustainable move towards lower yields or higher bond prices. Long term Treasury bonds have been consolidating that initial move over the past 6 to 7 weeks, and they appear to be breaking out again.

So why do I think long term Treasury bonds are going higher? Look at a daily chart (see figure 1) of the Ultra Short 20 + Year Treasury ProShares (symbol: TBT). This is a 2x leveraged ETF product that tracks inversely to the daily performance of the Barclays Capital 20+ Year U.S. Treasury index. The black dots are key pivot points, and TBT is breaking below a key pivot point (i.e., support level) in an established down trend. This is bearish for TBT, which is bullish for bonds.

Figure 1. TBT/ daily

Figure 2 is a daily chart of the i-Shares Lehman 20 + Year Treasury Bond Fund (symbol: TLT). This ETF tracks the Barclays Capital 20+ Year U.S. Treasury index. The indicator in the lower panel is the on balance volume indicator with a 40 day moving average, and TLT is under accumulation. The black dots are normal pivot points, and these show a series of higher lows, which is bullish.

Figure 2. TLT/ daily

This week the equity markets are looking a little "stressed". Within the context of a possible failed signal in equities, Treasury bonds are starting to look attractive once again.