{"id":22492,"date":"2024-11-05T07:30:29","date_gmt":"2024-11-05T12:30:29","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=22255"},"modified":"2024-11-05T07:30:29","modified_gmt":"2024-11-05T12:30:29","slug":"its-time-for-a-bounce-in-bonds","status":"publish","type":"post","link":"https:\/\/stage.jeffclarktrader.com\/market-minute\/its-time-for-a-bounce-in-bonds\/","title":{"rendered":"It\u2019s Time for a Bounce in Bonds"},"content":{"rendered":"

The price of long-term Treasury bonds peaked just before the Fed lowered their short-term interest rate target in mid-September.<\/p>\n

TLT – the Treasury Bond ETF – was trading near $101 at the time. It closed Friday below $91.<\/p>\n

That’s a 10% drop in the price of what is supposed to be a low-risk asset in about six weeks. As a result, long-term interest rates are sharply higher than where they were in September.<\/p>\n

That wasn’t supposed to happen.<\/p>\n

After all, the Fed wanted to lower interest rates. But, as we pointed out in a video essay<\/a> just before the last Fed meeting, sometimes when the Fed cuts short-term interest rates, it pushes long-term rates higher.<\/p>\n

And now the Fed is set to do it again.<\/p>\n

Are We Setting Up for a Bounce?<\/h2>\n

The FOMC meets this week to discuss the fate of the interest rate market. Wall Street expects the Fed will cut its target on short-term interest rates by another 25 basis points.<\/p>\n

Given what happened last time, bond traders are nervous.<\/p>\n

This time, though, it looks to me like Treasury bonds are setting up for a bounce.<\/p>\n

To be clear, I still think long-term interest rates will press higher over time – meaning long-term bond prices will press lower. Record budget deficits, and undisciplined fiscal policy demand that to happen.<\/p>\n

In the short-term, though, Treasury bonds are overdue for a countertrend move.<\/p>\n

Look at this chart of TLT…<\/p>\n

\"chart\"<\/p>\n

(Click here to expand image)<\/a><\/p>\n

You can see the falling wedge pattern that has developed on the chart, and the positive divergence on all of the various momentum indicators.<\/p>\n

This setup looks similar to the setup in late April, just before TLT rallied about 8% in two weeks.<\/p>\n

Similar action this time would have TLT trading near $99 by the middle of the month.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Of course, there’s no guarantee this plays out. TLT could easily break down from this wedge instead. But, the bond market seems to like surprising traders.<\/p>\n

Six weeks ago the Fed lowered short-term interest rates, and the bond market surprised traders by pushing bond prices lower.<\/p>\n

This week, the Fed is set to lower interest rates again. Traders appear to be betting on lower bond prices.<\/p>\n

The surprise would be a bond market rally.<\/p>\n

Best regards and good trading,<\/p>\n

\"Signature\"<\/p>\n

Jeff Clark
\nEditor, Market Minute<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

The surprise would be a bond market rally.<\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-22492","post","type-post","status-publish","format-standard","hentry","category-uncategorized","publication-market-minute","person-jeff-clark"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/22492","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=22492"}],"version-history":[{"count":0,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/22492\/revisions"}],"wp:attachment":[{"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=22492"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=22492"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=22492"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=22492"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=22492"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=22492"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/stage.jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=22492"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}