It was only 10 days ago that I was constructive on i - Shares Lehman 20 plus Year Treasury Fund (symbol: TLT). However, the technical picture has deteriorated, and the intermarket bond model is starting to weaken. A full fledged breakdown has yet to occur, but the recent breakout is looking more like a fake out. And this should be concerning.
First the the bad news, and this would be the failed breakout. Figure 1 is a daily chart of TLT with the on balance volume indicator in the lower panel. The breakout above the down sloping trend line from two weeks ago has reversed course and closed below the 91.27 support level. In addition, the on balance volume indicator, which was trending higher (i.e., higher lows) has reversed course as well. The bad news for TLT is that breakouts should not turn into fake outs. A close back above 91.27 and the down sloping trend line would be confirmation -once again - that TLT is heading higher. A close below the 88.46 support level would be confirmation of the down trend.
Figure 1. TLT/ daily
Now the good news. The good news essentially is that TLT has a low risk entry point. See figure 2 a weekly chart of TLT. In other words, prices are sitting against the 89.17 support level. Of course, a good low risk entry point doesn't say anything about the potential for a price again, and I think that is the message of this article. TLT is behaving poorly from a technical perspective.
Figure 2. TLT/ weekly