So where would you rather be? In the stock market or the bond market?
Here is a weekly line chart comparing the iShares 20+ yr Treasury Bond ETF ($TLT) and the SPDR S&P500 ETF ($SPY).
These are two widely followed proxies for Treasury Bonds and US Stocks.
We’re taking this one back 10 years to get a long-term perspective of
where we are today:
The way I learned it, when a market gets back to a historic support
(or resistance) level for the first time, there is market memory there
and a reaction typically occurs. In this case, we’re talking about a
historic support level where the market reaction would be a bounce
Now, does this have to happen? Of course not. Stocks can continue to
rally to all time highs and bonds roll over to new lows. But that seems
to be the consensus as I keep hearing on tv and reading on the internets
that we’re in a “rising rate environment”. If that’s the case, and consensus is right, then this support should be irrelevant.
But I came into the year very bullish bonds and I continue to believe that bonds trade higher and we are NOT in a rising rate environment. I think rates continue to fall and this chart bounces nicely.
Either way, the risk/reward here seems to be in favor of the bond
bulls (stock market bears) by a long shot. And at the end of the day
isn’t that all that matters? Finding the best risk/reward opportunities?
What do you think? Should we ignore our supply & demand principles here? Or pay attention?
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With markets continuing to see some volatile trading, today James Turk spoke with King World News about backwardation in gold and how quickly the price of gold will smash through the all-time high of $1,925. Turk also warned that the shorts must be getting “frantic by now” because of the action in gold.
Turk: “Gold finally plowed through $1250, Eric, and we got the expected move higher. The central planners tried ‘circling the wagons’ at $1,275, but they could not hold that line — there was just too much buying power behind gold’s surge….