What Are Bond Traders Thinking?

TLT is the iShares 20+ year Treasury Bond Fund ETF. It reflects the prices of longer-term bonds. A bond ETF doesn’t usually capture my attention. But this one did.

On the daily chart TLT is just breaking above resistance formed by the February 2016 high.

6.10.16.1blogLooking at the weekly chart, over a longer time period, I found a similar pattern. TLT is about to break above early 2015 highs:

6.10.16.2blogOf course I had to check the seasonal pattern for TLT. Usually, there isn’t much of a track record with TLT. But this time of year is different.

There is a decent track record for buying TLT at the start of this week (the first full week of June). Let’s focus on the next 12 weeks. From the start of this week, TLT has returned an average 2.5% over the next 12 weeks, with gains in 9 out of 13 years (a ‘win’ rate of 69%).

6.10.16.3blogI know what you’re thinking – is it worth considering a trade that has averaged only a 2.5% return over 3 months? Well, a 2.5% return over 12 weeks works out to a 53% annualized return. I think most traders and investors would be happy if they could generate the equivalent of a 53% annual return on every trade they made.

Now let’s look at entering a TLT trade on Monday, the start of the second full week of June, and we’ll focus on the same ending date (so the time period is 11 weeks this time). From the start of this week, TLT has returned an average 3.0% over the next 11 weeks, with gains in 10 out of 13 years (a ‘win’ rate of 77%). The odds are getting better. And the annualized return is now 64%.

6.10.16.4blogFinally, let’s look at entering a TLT trade on a week from Monday, the start of the third full week of June, and we’ll focus on the same ending date (so the time period is 10 weeks this time). From the start of this week, TLT has returned an average 3.4% over the next 10 weeks, with gains in 11 out of 13 years (a ‘win’ rate of 85%). The odds are even better, and the annualized return is now 73%.

6.10.16.5blogOf course, stocks do not follow exact seasonal patterns. TLT, or any other security, will not wait for the historically-optimum time to break out. Many breakouts, if they are going to happen at all, will start sooner, and some will start later. But this pattern of good returns, on a relatively low beta ETF, strongly suggests the ETF has good chances of repeating previous successes this time of year.

Now for the odd part. Bond prices move inversely to interest rates. The strength in this ETF suggests traders are expecting interest rates to decline. That’s especially interesting in light of next weeks’ Fed meeting where the Fed may or may not raise rates for a second time. TLT has a good seasonal pattern over the next 10 to 14 weeks. So a rise in this ETF over the next several weeks would not be unexpected. But it’s still interesting because of the Fed meeting. What are the institutional traders thinking?

Of course, there’s much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2016 Stock & Options Training LLC

Gregg Harris is the Chief Technical Strategist at MarketTamer.com.

MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.

The sender of this email makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.

The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options (http://www.optionsclearing.com/about/publications/character-risks.jsp). The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.

The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.

Past performance is no guarantee of future performance. This product is for educational purposes only. Practical application of the products herein are at your own risk and MarketTamer.com, its partners, representatives and employees assume no responsibility or liability for any use or mis-use of the product. Please contact your financial advisor for specific financial advice tailored to your personal circumstances. Any trades shown are hypothetical example and do not represent actual trades. Actual results may differ. Nothing here in constitutes a recommendation respecting the particular security illustrated.

Be Sociable, Share!

Related Posts

 

MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.


This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.


The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.


The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.