The “Boring” Bond Market’s Smart Money is Turning Bearish Again

There’s a reason why they call the bond market the “smartest money in the room”…

Nick shot me a “Slack” on Monday that included this image from Bloomberg

tlt stock chart

(Click to enlarge)

The chart depicts how the negative momentum in the bond market is growing as we’re seeing a trend of somewhat overwhelming selling in the “long bond” or 20-year Treasuries ETF.

As it so happened, I was looking at a price chart of the same ETF, but I was looking at the shift in price trend that we’ve seen since the beginning of the year, this chart is now officially worrying me.

We’ll get to my chart in a minute, first let’s talk about what we see.

In the middle of February, the 50-day moving average for the iShares 20+ year Treasuries ETF (TLT) turned bearish. This is the first shift in the trend since the bond market turned bullish shortly after October last year.

More importantly, this is the first time that we’ve seen the bond market turn bearish like this since January 2022.  Here’s the chart.

tlt stock chart

(Click to enlarge)

Think back to that time with me for a minute…

Inflation was on the rise. The Nasdaq and S&P 500 had topped out from their all-time highs just a few weeks prior. The Fed? They were gearing-up to battle inflation.

Kind of feels a little similar, no?

But in 2022, it was the bond market rolling over that really tilted things into the bear’s corner. I think we’re looking at a similar situation.

A few months ago, we talked about how the bond market was getting ready to move into a long-term bull market trend when the TLT was preparing to cross above $100. That didn’t happen, we’re trading at $92.50 now.

Now that 50-day moving average has turned bearish, indicating that the intermediate-term trend is once again bearish.

The combination of these two trends means one thing, the “smartest money in the room” is preparing for a bear market and likely a recession, just like they did in 2022.

Bottom Line

My words over the last few weeks have been preparing you for a short-term correction that leads into another bullish move higher.

I still believe that will happen. Looking out on the horizon – which is what the bond market does – there could be some dark clouds heading this market’s way.

About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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