We have reviewed TIP and TLT nominally by weekly charts as they were a previous NFTRH+ double highlight on Treasury bond funds, inflation protected (TIP) and nominal (TLT). Each continues to have a bullish slant by the weeklies.
Their ratio is an inflation expectations indicator, and we noted that it was expected to have trouble at resistance, with the initial burst of the inflation bounce needing a rest.
Even though TIP is currently dropping a bit vs. TLT, I think it is a better bet for Treasury bond exposure because I think that inflation is going to pick up after a process of grinding into an inflationary phase from a deflationary one, with the US dollar as the beneficiary (deflationary) and would-be foil (inflationary).
The daily chart of TLT looks bullish to me as it sneaks outside of a consolidation wedge it has been building since the stock market bounce took flight. Indeed, I thought about buying it back again, but…
…given the views on future inflation potential, I also took a look at daily TIP, which is bullish as well. If I buy a long-term T bond fund, it would probably be this one as it rises in a neat looking channel (currently consolidating gains).
Back to TLT, it is one of the Risk ‘off’ items and that break from the wedge and hold of the 50 day moving averages does not bode well for stocks. So as long as this condition holds, I’d say that is a negative indicator on the fly for bouncy stock bulls, who seem to be forgetting about the difficulties of January and February (and last August and September).
Conversely, if TLT unexpectedly breaks down, we’d have the opposite signal that perhaps the now more than half year of stock market difficulties is ending.