Charting Bonds and Biotech

The iShares Barclays 20+ Year Treasury Bond Fund (TLT) is testing its 200-day moving average, which could have implications for the broader market. The weekly chart, which I have used many times in the past, shows how rallies in the equity index have followed breakdowns from wedge-like consolidations in the TLT. There is also a minor correlation between TLT reversions to its 200-day moving average and sideways action in the S&P 500.

In April 2009, when the TLT touched its 200-day moving average, the S&P began to trade in a sideways channel that formed the right shoulder on an inverse head and shoulders pattern. The index broke above the neckline in July and began the second leg of the 2009 rally. When the TLT broke down from the wedge consolidation in late 2010, the decline was detained at the 200-day moving average for about five weeks. During that time, the S&P moved sideways before breaking above the previous May high at the end of the year....304 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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