TLT has been in bear mode since December same time as gold. I would wait for it to X 40 wkma to indicate a new bull market. Although inflation is low and still falling, QE forces are dominating as with GLD.
If both VIX lines rise above 25+, SPY is a play as the fear guage will be high enough (indicator here is the 15 kwma turning). For now the economy is weak and SPY/TLT are volatile and hard to predict.
Sell all SPY and stay cash for now. TLT buy opportunity will occur when the TLT:SPY X 10wkma. Remember a twist could be implemented to reduce the bond yields. With so much debt the interest rates have to remain low.
In any market crash a la 1987, bonds initially spike in yields (prices fall). This causes the stock market to outright crash! At some point in 2-4 weeks, TLT will start to show strength against SPY. This will be a good time to buy as it will have bottomed and deflation or very low inflation will be happening this year.
The VIX should rise for the next few months creating problems for CBs in their efforts to talk up the market! However, the 200dma for SPY is 150. At this point, CBs will talk up the market and it should bounce. BUT the volatility will continue because the weak economy will get weaker. So watch VIX trend and TLT:SPY chart.
This will put off risk/off mode until perhaps Aug 9. For now, stay cash with some SPY….
It’s best to stay cash for now (no TLT and no SPY). The VIX is now rising and Wall Street is worried about QE shutoff. Even if the Fed indicates on Jun 19 a hold, the market may still drop.
In 2012, the Fed was due to shutoff the twist on June 30 and yet the market crashed in May. Care must be taken 1-2 months before the shutoff of stimulus as the market starts down BEFORE the shutoff or reduction occurs due to profit taking.
So it’s back to the TLT:SPY chart and the transition points. It’s always best to invest only at the transitions. The next transition (TLT:SPY X 10wkma) will most likely occur mid-July although the line is now rising. The TLT:SPY chart should be watched daily now.
I advise selling all TLT and wait for next important CPI on July 16 for next decision point.
You can buy more SPY today.
If SPY looks like it is closing up today, it is a good time to buy! It has bounced off the BBd. The past year it always bounces off the BBd or the 50dma.
TLT is also a hold as it will also bounce up with SPY for about 12-14d.
Mortgage bond sell-off has hit TLT. BUT the way to filter this event is with the No. 1 TLT:SPY chart. When it crosses, its a strong buy. First possibility is mid-July.
Economy is still weak so Fed on Jun 19 will indicate continued QE. Stock market will hit 10 wkma. SPY hits 10wkma and bounces again up until mid-July.
Earliest CPI core 2.0 is possible on July 16. When TLT:SPY X 10wkma, this will be the second confirmation signal to buy TLT as surge to occur in Aug/Sep.
A possible MBS tapering may start on Jun. 19 although unlikely. A twist is in the cards on Sep 18 Fed Mtg.
I would say its an early risk off. With gold falling and Bernanke hints to banks, QE will be turned off/reduced Jun 19. I predict core inflation will be reported on Jun 18 for May at 2.1..a clear QE off signal. The VIX is flat to rising and clearly at a bottom. It has been confusing the last month as the market is nearing a transition point showing oscillations on the TLT:SPY chart around the 10wkma.
The run on TLT will start this month to 124 then run to 135-140 in July-early August time frame. Low on SPY will be 149-151.
Newsletter advisors very bullish on teasuries:
http://theshortsideoflong.blogspot.com
And also approaching deflation charts over the last 2 years!
http://theshortsideoflong.blogspot.com/2013/05/global-macro-update.html
I would suggest buying TLT at this point (short term gain spec positions). Core position continues to be in 0 coupons as indicated by the chart above.
TLT should be sold as TLT:SPY indicates risk on again.
I am in cash now.
I suspect that until core inflation rises to 2.1 the spy will grind higher. Core inflation has dropped to 1.9 and cpi to 1.5. These rates are too low and the Fed will continue until they both reach 2.x. Since early last year inflation has been stubbornly too low hence the large QE efforts.
Perhaps the June cpi report (core >=2.1) will be high enough for the Fed to signal a relaxed stance. Oil has turned ‘bull’ again so gas should also start to rise. CPI should drive higher along with stocks until cpi 2.x has been achieved.
The good news is a bubble has clearly been created in SPY and when the stimulus is scaled back, the correction will become a crash of 15%+.
TLT has turned the corner definitely – 2 weeks ago. The spy is way overbought and cpi is flat to falling see gas buddy. Gold shows future inflation falling rapidly.
TLT and bond traders are the smarter ones and sense the economy when it turns BEFORE the stock market. Curiously TLT and SPY can rise at the same time representing these two mindsets (realist vs fluff). SPY recognizes the economy but does so all at once and in a very short time frame say 2 weeks- 1 month. If you waited for this event, however, you would be caught off guard. For this reason, I am moving my TLT:SPY chart to number 1 spot as it captures this transition point best specifically TLT and SPY rising at the same time but TLT faster.
On this chart, look for a 0.90 or 0.95 ratio as an early sell sign.
Credit Flow Investor 