The iShares Lehman 20+ Year Treas Bond (TLT) is declining towards a test of the 50 DMA, now at 88.64, which if violated, should trigger downside follow-through to the rising 200 DMA, now at 87.86. Truth be told, until Tuesday (day before the FOMC statement), I was expecting the TLT's to climb towards a retest of the February high at 91.26. Instead, we have just the opposite situation: a decling TLT (rising long rates), at the same time the Fed appears to be telling us that economic weakness should moderate inflationary pressures. For the time being, the markets are warning us that they dont think the Fed necessarily is undertaking the proper course of action, or that the Fed is between a rock and hard place now. As the Wall Street Journal suggested yesterday, the Fed cannot afford to aggrivate the fragile housing sector on one hand, and yet it suspects inflationary pressures have not yet been sufficiently quashed, but cannot do much about it. If such perceptions intensify, then let's expect the long end of the bond market (prices) to continue to decline (rates rise).



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.