Bonds and Oil May Show Reopening Excitement Fade
For over a month, the stock market has priced in a post-Covid reopening. Now there could be signs of that trend exhausting itself.
First and foremost is the recent double-bottom on the iShares 20+ Year Bond ETF. We cited downside in this instrument twice as it hit the top of its channel. But it made a slightly higher low/double following the last drop. That could suggest the intermediate-term downtrend, in place since August, has run its course for now.
There are also some potential positives for bonds as coronavirus cases and jobless claims rise. Even with a vaccine coming, the near-term employment picture is grim because restaurants and hotels appear to have maxed out their rehiring for now. Recent data from the Labor Department suggests they could start bleeding jobs again.
Second, there’s the Federal Reserve meeting on Wednesday. Officials have indicated they want to start buying longer-term Treasury bonds, which this ETF holds. Incremental mention of the new policy could help boost TLT.
Third, TLT just had a bullish inside week, which means its range is tightening.
Next are the intermarket conditions. Oil rallied on reopening hopes and the vaccine news. That could have been “buy the rumor.” Now that Pfizer’s shipping its drug, will investors “sell the news?” The fundamentals on oil haven’t been great either. OPEC+ has achieved little in terms of lasting production cuts. Inventories have also been higher than expected for several weeks. (Last week EIA’s total rose by 15.2 million barrels, the biggest increase since April.)
Finally, crude-oil futures have a outside day/spinning top candle stick today. The major energy ETFs like
XLE
and SPDR
XOP
also have bearish engulfing days.
Oil and energy tend to move in the opposite direction as bonds, so that could be another potential positive for TLT.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
First and foremost is the recent double-bottom on the iShares 20+ Year Bond ETF. We cited downside in this instrument twice as it hit the top of its channel. But it made a slightly higher low/double following the last drop. That could suggest the intermediate-term downtrend, in place since August, has run its course for now.
There are also some potential positives for bonds as coronavirus cases and jobless claims rise. Even with a vaccine coming, the near-term employment picture is grim because restaurants and hotels appear to have maxed out their rehiring for now. Recent data from the Labor Department suggests they could start bleeding jobs again.
Second, there’s the Federal Reserve meeting on Wednesday. Officials have indicated they want to start buying longer-term Treasury bonds, which this ETF holds. Incremental mention of the new policy could help boost TLT.
Third, TLT just had a bullish inside week, which means its range is tightening.
Next are the intermarket conditions. Oil rallied on reopening hopes and the vaccine news. That could have been “buy the rumor.” Now that Pfizer’s shipping its drug, will investors “sell the news?” The fundamentals on oil haven’t been great either. OPEC+ has achieved little in terms of lasting production cuts. Inventories have also been higher than expected for several weeks. (Last week EIA’s total rose by 15.2 million barrels, the biggest increase since April.)
Finally, crude-oil futures have a outside day/spinning top candle stick today. The major energy ETFs like
XLE
and SPDR
XOP
also have bearish engulfing days.
Oil and energy tend to move in the opposite direction as bonds, so that could be another potential positive for TLT.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
