Monday, January 3, 2011
PROSHARES ULTRASHORT 20+ YEAR TREASURY
Bought the 33/36 TBT call spread today for $2.30. Bond mutual funds that own Treasury, mortgage, corporate and other taxable bonds last week saw their first net cash outflow in two years. Premise is that bond prices will continue their downward trend as people shift towards equities. TBT was trading around 37.70 at the time of the trade.
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After an initial gap up in the morning that looked to be part of an island reversal on the 3-day chart, TBT has steadily declined throughout the day and is now below Friday's close. Although bonds have been in a downward trend (TBT up) since October, the latest peak on 12/28 was below the previous peak on 12/15, a possible bearish signal. MACD also turned bearish on the daily chart on 12/21. Longer term, on the weekly chart, MACD is still bullish though divegence has started to slope downwards.
ReplyDeleteTreasuries are down nicely today thanks to the ADP employment report which was bullish for the dollar. Still positive outlook for this trade.
ReplyDeletehttp://www.marketwatch.com/story/fed-officials-lower-temperature-of-qe2-debate-2011-01-11
ReplyDelete"Fed officials lower temperature of QE2 debate"
Treasury prices are down today on rhetoric indicating that their may be a possibility of stopping or lessening the quantitative easing (QE2) put in place by the Federal Reserve. QE2 keeps treasury prices artificially high by creating demand that otherwise would not be there. If this program were to be stopped, treasury prices would likey fall which means that TBT would rise as it is a short treasury ETF.
Treasuries continued to be supported by buying from the Fed, though moves in either direction have been small. I maintain a positive outlook on this trade.
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