To some degree, the Lehman 20 Year Treasury Bond ETF (TLT) trades inversely to the equity indices like the SPYs; however, my sense is the recent upside explosion in the stock averages and the recent plunge in TLT prices have "corrected" and defused the bulk of that relationship, which if accurate, means that a new relationship is forming based less on flight-to-safety and more on the still-challenging (to put it mildly) economic fundamentals that will not be corrected any time soon.

As the daily chart indicates, a very interesting technical situation has developed in the TLTs during the wild swings between mid-September and mid-October, the net result of which suggests strongly to me that ALL of the action represents a giant coil pattern between 94.00 and 100.50/80. Today's reversal (so far) off of important intermediate-term support at 94.00 amidst underlying supportive momentum oscillators, coupled with the price pattern exhibited within each down and up leg since mid-September, argues strongly that the TLTs are in the early stages of another traverse towards a test of the upper coil trendline, now in the vicinity of 99.50. Only a plunge beneath key support at 94.00-93.80 and a breach of the rising 200-day moving average at 93.23 will invalidate my current technical outlook. Otherwise, the technicals and fundamentals suggest longer-term bond prices have unfinished business on the upside (rates on the downside).



Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com, a real-time diary of his technical chart analysis and trading alerts on all major markets. For more of Mike Paulenoff, sign up for a free 15-Day trial to his MPTrader Diary by clicking here.