Treasury Funds

There are both Bull and Bear funds. There are also double funds if you desire leveraged instruments in your trading. There are ETFs for 10 year, 7 year, 20 year, and 30 year treasuries.

Below under “Comments, Analysis, and Recommendations”, I will write my comments for the Treasury ETFs and give you my chart analysis. I want to give you good evidence as to why I believe Treasury Funds are heading higher or lower. I base my analysis on several technical tools. I use Exponential Moving Averages, Elliott Wave Analysis, Fibonacci, Japanese Candlestick patterns, trend lines, and support/resistance lines.

My goal is to provide you with the information needed so you can make the best trading decisions with these Treasury Funds. My goal is also to help you to become profitable and most of all to help keep you from loosing a ton of money. I will provide you the potential price targets to take profits and stop loss levels to help preserve your trading capital in these Treasury Funds.

Click on the desired Treasury Funds link below to view the chart.

Comments, Analysis, and Recommendations

TBT has had a nasty decline, which indicates that interest rates have been declining. Today had a big increase in volume as the price also closed near the high of the day, even though it was a down close. Is this a sign of capitulation? We will not know for sure until we see more time pass.

Why do I speculate concerning capitulation in treasuries? If you have been following me for a while now, you know that I expect the interest rates to rise as the overall market melts. It has moved to lower lows recently as the Major Indexes have also. I believe that is about to reverse.

I do not like to bottom fish or using another cliché, I do not like catching a falling knife. I will wait for signs the trend is changing before recommending buying TBT. This may be months out, therefore, we should be patient and wait. Right now, the 13 EMA is below the 55 EMA and the 55 EMA is below the 233 EMA. This indicates the trend is a strong down. We will wait until the landscape changes.

TBT had a very ugly day today. It would be save to short TBT at these prices or go long TLT. The critical resistance level for TBT is the 6/10/10 high of 40.01.

It looks like TBT is going to continue following the Major Index Funds lower. I will have to wait for the decoupling of Interest Rates and the Major Index Funds. The critical support is still the 5/25/10 low.

TBT made a higher high today indicating that higher prices should be forthcoming. There is an unfilled gap at the 43 level and should draw the price higher. There is another unfilled gap at the 45 level. If the price fills that gap, it would have also broken the 5/13/10 high along with breaking above the 55 EMA also. This will indicate that even higher prices are in store for TBT. The 6/1/10 low is the critical support to watch.

You should notice that the price action for TBT is not much different that of SPY. I do expect that TBT will decouple from SPY, however, I do not know when. I expect TBT to break the 5/13/10 high if SPY does. On the other hand, it is not a guarantee that SPY will break the 5/13/10 high if TBT breaks it.

Has anyone else noticed how TBT wave pattern looks like the Major Index Funds, such as DIA and SPY? The noticeable difference is that TBT did not decline from a high point like DIA and SPY. Does this mean that TBT will continue to mimic the Indexes? Personally, I think it will decouple in the next couple of weeks. However, the trend is down as is the Indexes.

The critical resistance is the same as SPY, the 5/13/10 high. The critical support is also the same, the 5/25/10 low. The rise off the lows has taken close to 2 ½ days, which the decline from the high on 5/13/10 has taken around 8 days. Three days is a Fibonacci 38% of the decline, 4 days is 50%, and 5 days is 62%. This gives reason I believe the price will rise some more, but we will have to wait and see if the 5/13/10 level will be taken out.

TBT potentially could have hit a bottom today. I was misstaken when I said rates should head lower of the next couple of months. It only took a couple of days to reach the anticipated price level.

Is it a long lasting bottom or not is the question? The Elliott Wave count could indicate that the price direction for the next couple of days or even weeks should be to the upside. The price today bounced off support of last resort.

I expect the price to challenge the TAZ of the 13 and 55 EMAs. After that is a guess. However, we can make some intelligent assumptions based on Elliott Wave Analysis. If today’s low is not a significant low and the price eventually takes out the December 2008 low, then the price must stay below the 5/13/10 high. Moreover, if the price takes out the 5/13/10 high, then today’s low is a lasting low and we could expect much higher prices. If this happens, then expect the price to break above the 50 level and even higher prices from there.

Fear of the World Markets has pushed bonds and treasuries higher in the last month. TBT is the inverse of the bonds and therefore follows the direction of the rates. Bonds are moving higher as rates move lower. Will that continue?

I believe rates are heading lower over the next couple of months. The critical support now is the December 2008 lows. There is not much below that to hold up rates after that.

I honestly believe interest rates will move much higher down the road. I just do not know when. I will follow the technical landscape and go with the flow. The trend is definitely down right now and looks to remain that way for a while.

The Treasury Funds price action over the last couple of months looks like a tightly wound spring that is about to be sprung. It is hard to tell which direction. There is so much to consider when viewing the chart for TBT.

First, let us consider the support lines. There is a long-term trend support from the 12/18/08 low connecting the 10/2/09 low. The current price is not that far above that trend line. We should know soon if that support would hold. The price has been bouncing from a horizontal support coming across the 12/18/09, 2/5/10, and 2/26/10 lows. These two support lines intersect Monday. Monday could be a very important day for the Treasury Funds and the direction of interest rates.

Now the resistance lines to consider. There is a trend line connecting the high on 2/27/09 and the high of 1/11/10. It was broken intraday on 2/18/10, but could not stay above it. Right now, it does not come into play, but is a significant level that if broken will signal that much higher prices are coming. The one that may come into play very soon, is the trend line resistance that was one support. That line connects the lows of 10/2/09 and 11/30/09. The price has traded through that line several times since the beginning of February. Therefore, this line may not be that significant.

This spring is about to be uncoiled. When it does, the price should move a good distance with speed, whichever direction it goes. Wait for a break of one of the trend lines and trade when there is a pull-back to the line.

Be a smart trader!

Craig Wells

I am not sure I have the Elliott Wave count correct for the Treasury Funds. The price action from the 2/26/10 low looks like a flat, which has a 3-3-5 wave pattern. View the 60-minute chart of TBT and you will see to what I am referring. There is a possibility that the price action from 2/26/10 through 3/3/10 is a beginning triangle, which is a five-wave pattern in the direction of the main trend. The significance is that it is a 5-3-5-3-5 pattern, but a triangle and the fourth wave overlaps wave one most of the time.

Whichever pattern it is, there still needs to be one more small push higher Monday for the Treasury Funds.. After that, we will have to wait and see. Beginning triangles are always in wave one. In this case, it is wave one after the last corrective pattern. If this is the, a completed five-wave pattern should take place Monday morning and then a small correction is expected.

The point to be made here is the fact that wave four cannot overlap wave one, except in beginning and ending triangles. Wave 1 is the high on 3/3/10 and an overlap into that price will tell you that the pattern from 2/26/10 was a flat and that prices are heading lower. That is your key level to watch in the next couple of days.

If the above mentioned is not a flat, you should see a small three-wave correction and another five-wave pattern to higher highs. This will indicate that the price is heading to the 60 to 65 levels.

Be a smart trader!

Craig Wells

The Treasury Funds are set to change directions soon. TBT has traded higher the last two days even though it was not that pretty in doing so. I have already said that TBT needs to start moving higher soon.

I have labeled the chart to reflect a pair of waves 1 and 2. This indicates that wave 3 should be an extended wave and should push the price above the 60 level. I have also shown where the c-wave should be complete in the last wave 2. This is the reason the price needs to move higher soon to confirm my analysis.

The critical support level is the 11/30/09 low. A break of that low will cause an Elliott Wave technician to back up and re-evaluate the wave count. It will definitely change the interpretation and future direction of interest rates.

I believe interest rates are heading higher, but the market does not care what I think no matter how strong the conviction or my knowledge in technical analysis. However, there are signs in technical analysis that can help give us direction based on strong probabilities. The probabilities using technical analysis for interest rates falling to new lows in very slim. However, we are dealing with probabilities. A drop below the 11/30/09 low will increase the probability of rates falling instead of rising.

Look for a clear five-wave move up before entering a trade in TBT. Use the 2/26/10 low as the stop loss when that happens. An entry anywhere below 50 will generate a good profit when prices reach well above the 60 level.

Be a smart trader!

Craig Wells

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