See figure 1 a weekly price chart. The 40 week moving average (i.e, red line) is heading higher, and prices are trading above key pivot points, which are areas of support (buying) and resistance (selling). In essence, this is a "beautiful" chart with lots of momentum (i.e., note the breakout gaps). If this were a stock, the analysts and pundits would be all over the "breakout" ---blah, blah, blah.

Figure 1. Price Chart/ weekly

But figure 1 isn't a stock, it is the yield on the 30 year Treasury, and the chart has been turned upside down. What I hear and read is this move in Treasury bonds isn't sustainable. A sub 3% yield isn't possible, but isn't that what "they" said about a sub 4% yield? Which happens to be in the rear view mirror.

People still don't believe, and they are not interpreting the significance of the price action correctly. Maybe if this were a stock people would be wowed by the price action. But they aren't. For the record, figure 2 is a weekly chart of the yield on the 30 year Treasury bond (symbol: $TYX.X). Are the low yields of late 2008 the next stop?

Figure 2. $TYX.X/ weekly

In up coming commentaries, I will have more on why I think this move is even more sustainable than most analysts are currently anticipating. I last wrote about this secular theme on July 8, 2010: "The Case For Treasury Bonds".

By Guy Lerner

http://thetechnicaltakedotcom.blogspot.com/

Guy M. Lerner, MD is the founder of ARL Advisers, LLC and managing partner of ARL Investment Partners, L.P. Dr. Lerner utilizes a research driven approach to determine those factors which lead to sustainable moves in the markets. He has developed many proprietary tools and trading models in his quest to outperform. Over the past four years, Lerner has shared his innovative approach with the readers of RealMoney.com and TheStreet.com as a featured columnist. He has been a regular guest on the Money Man Radio Show, DEX-TV, routinely published in the some of the most widely-read financial publications and has been a marquee speaker at financial seminars around the world.

© 2010 Copyright Guy Lerner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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