
Treasury Bonds, Gold, Utility Stocks -- Should You Join the Rush to Buy?
As U.S. investors return from the July 4 holiday, they will find the yield on the U.S. Treasury bond at an all-time low and gold futures just below their multiyear high, set on June 24. Global investors are seeking "flight to safety" investment strategies.
The yield on the 30-year U.S. bond declined to a record low of 2.146% as July 5 began. Since this all-time low yield occurred in premarket trading in the U.S., logic would indicate that overseas investors want to own safe U.S. financial assets. Investors around the world are fed up with negative interest rates as reports indicate that more than $11 trillion in global bonds have negative yields.
Comex gold futures have been extremely volatile. Gold traded as low as $1,252.8 per Troy ounce on June 24, and as high as $1,362.6 on the same day, both on "Brexit" volatility. After a dip to its 200-week simple moving average of $1,308.2 on June 28, gold rebounded to as high as $1,362.6 in July 5 premarket trading. My upside target for 2016 is $1,639.9, as long as weekly closes are above the 200-week simple moving average.
The Dow utility average traded to an all-time high of 719.24 on July 1 as investors continue to rush into dividend stocks. The utility average is up 23.9% year to date, which has absorbed the advance of many future dividend payments. This is a phenomenon that's head-scratching, as it's hard to believe that utilities are the new momentum stocks.
Investors can trade the U.S. Treasury 30-Year bond like a stock using the 20+ Year Treasury Bond ETF (TLT) - Get Report , which is an exchange-traded fund backed by a basket of U.S. Treasury bonds with maturities of 20 years to 30 years.
Investors can trade gold like a stock using the SPDR Gold Shares ETF (GLD) - Get Report , which is backed by gold bullion.
Investors seeking the safety of dividends can trade the Utilities Select Sector SPDR Fund (XLU) - Get Report , which is a basket of 29 utility stocks.
Investors betting that junk bond yields will tighten against U.S. Treasuries should consider the SPDR Barclays High Yield Bond ETF (JNK) - Get Report . Keep in mind that the performance of junk bonds correlates to the stock market, not to the bond market.
The S&P 500 SPDR ETF (SPY) - Get Report has a year-to-date gain of 3.1%, while the U.S. Treasury bond ETF, the gold ETF and the utility stock ETF have year-to-date gains of 16.6%, 26.6% and 21.3%. "Flight to safety" investment strategies continue to outperform "risk-on" equity investment strategies.
Here's the weekly chart for the bond ETF.
Courtesy of MetaStock Xenith
The bond ETF has a positive but overbought weekly chart, with the ETF above its key weekly moving average of $134.57 and well above its 200-week simple moving average of $118.88, last tested in July 2015. The weekly momentum reading ended last week at 81.42, up from 78.38 on June 24, moving above the overbought threshold of 80.00.
Investors looking to buy the bond ETF should continue to do so on weakness to $136.83 and $132.45, which are key levels on technical charts until the end of July and the end of 2016, respectively. The $132.45 level was tested on June 23. This key level remains in play for the remainder of 2016.
Investors looking to reduce holdings should do so with the exchange-traded fund above $140.45, which should be a magnet through September.
Here's the weekly chart for the gold ETF.
Courtesy of MetaStock Xenith
The gold ETF has a positive weekly chart, with the ETF above its key weekly moving average of $122.89. The ETF ended the week above its 200-week simple moving average of $126.06 after being below it since the week of May 10, 2013. The weekly momentum reading rose to 74.80 last week, up from 66.04 on June 24.
Investors looking to buy the gold ETF should do so on weakness to $121.65, which is a key level on technical charts until the end of July.
Investors looking to reduce holdings should consider doing so on strength to $157.36, which is a key level on technical charts until the end of 2016.
Here's the weekly chart for the utilities ETF.
Courtesy of MetaStock Xenith
The utilities ETF has a positive but overbought weekly chart, with the ETF above its key weekly moving average of $50.23 and well above its 200-week simple moving average of $41.89. The weekly momentum reading rose to 88.37, up from 85.96 on June 24.
Investors looking to buy the utilities ETF should do so on weakness to $48.26, which is a key level on technical charts until the end of September.
Investors looking to reduce holdings should continue to do so above $51.79, which is a key level on technical charts until the end of July.
Also, $51.79 and $50.05 are key levels until the end of July and the end of 2016, respectively.
Here's the weekly chart for the junk bond ETF.
Courtesy of MetaStock Xenith
The weekly chart for the junk bond ETF remains neutral, with the ETF above its key weekly moving average of $35.08. The ETF is well below its 200-week simple moving average of $38.98, still reflecting the popping of the junk bond bubble. The weekly momentum reading ended last week at 76.77, down from 78.44 on June 24. A weekly close below $35.08 will shift the weekly chart to negative.
Investors looking to buy the junk bond ETF should do so on weakness to $32.88 and $31.97, which are key levels on technical charts until the end of June and September, respectively.
Investors looking to reduce holdings should do so on strength to $37.17, which is a key level on technical charts until the end of 2016.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.













