Monday, December 20, 2010

An Important Week For Bonds

Here is the weekly chart of the 30-year US Treasury (ZB #F-W). It has crashed in recent weeks. There was support at 122, but it was broken this week. Next support is 117’03. If that is broken, then next potential support is 114 and then 106 and 104. Price is very stretched right now on Bonds, so a bounce or pause in the decline cannot be ruled out.

This does look like a nasty Bear Market though, so bounces into resistance will get my attention. The flip side is that these downside levels do not have to be met and any rallied that break through resistance can reverse this pattern to bullish very quickly.

Here is the daily chart of the 30-year US Treasury. You can see where resistance is. If this resistance is cleared, then it votes for a resumption of the uptrend. The 15-minute chart has already turned bullish.

The Vanguard Short-Term Bond ETF (BSV) has hit support, so again, a bounce in bonds cannot be ruled out. A bounce can also turn into a bottom. Those price extension on the 30-year do not have to be met.

I have been saying all along that the Build America Bond (BAB) program would have to be extended. The Municipal Bond market has been hammered on the fact that the BAB extension was not included in the recent tax compromise, but things can reverse quickly in the markets these days.

Let’s see if BAB can break above the 20-day.

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