'Flight to Safety' Investments in Treasury Bonds, Gold, Utilities Face Technical Downgrades

Technology stocks continue their momentum runup, setting new highs almost daily. The Technology Select Sector SPDR Fund ( (XLK) ) set an all-time intraday high of $55.42 on Tuesday led by its largest component Apple (AAPL)  setting its all-time intraday high of $154.88. Investors read the headlines, and chase the momentum ignoring the "flight to safety" investments available in bonds, gold bullion and utility stocks.

The best investment for 30-year U.S. Treasury bonds is the 20+ Year Treasury Bond ETF (TLT) . Gold bullion is best traded using the SPDR Gold Shares ETF (GLD) . Investors seeking dividends invest in the Utilities Select Sector SPDR Fund (XLU) .

Investors interested in junk bonds can trade the SPDR Barclays High Yield Bond ETF (JNK) . Typically, junk bonds perform in tandem with stocks, not bonds. Corporate debt is at a record high so it's not prudent for investors to stretch for yield, but this exchange-traded fund can be traded.

Keep eyes on the 200-week simple moving averages as these are the "reversion to the mean" for each exchange-traded fund. The "reversion to the mean" is an investment theory that the price of a stock, market or exchange-traded fund, will eventually return to a longer-term simple moving average. A logical choice that's easy to track is the 200-week simple moving average. A ticker trading above its 200-week simple moving average will eventually decline back to it on weakness. Similarly, a ticker trading below its 200-week simple moving average will eventually rebound to it on strength.

Here's A Scorecard for the 'Flight to Safety' ETFs
Here's A Scorecard for the 'Flight to Safety' ETFs

The S&P 500 ( ) has a gain of 7.1% year-to-date versus 6.8% a week ago. The U.S. Treasury bond ETF is up just 1.3% year-to-date versus 2.2% a week ago. The gold bullion ETF has a gain of 5.9% year-to-date slipping from 9.2% a week ago. The utilities stocks ETF has a gain of 5.7% year-to-date down from 5.9% a week ago. The Junk Bond ETF is up 1.3% year to date down from 1.6% a week ago.

The 20+ Year Treasury Bond ETF (TLT)
The 20+ Year Treasury Bond ETF (TLT)

Courtesy of MetaStock Xenith

The yield on the 30-year U.S. Treasury bond set the high end of its trading range at 3.215% on March 14. The low end of the yield range has been 2.824%, set on April 18. My semiannual value level is 3.302% with a quarterly pivot of 3.089% and a weekly risky level of 2.810%. The bond yield is above its 200-day simple moving average of 2.777%, and is now just above the 50-day simple moving average of 3.014% held on Tuesday.

The U.S. Treasury 30-Year Bond trades like a stock using the 20+ Year Treasury Bond ETF, which a basket of U.S. Treasury bonds with maturities of 20+ years to 30 years. As a stock-type investment it never matures and interest income is converted to periodic dividend payments.

The weekly chart for the bond ETF (TLT) ($120.62 on May 9) will be downgraded to negative if the ETF ends the week below its key weekly moving average of $121.33. The bond ETF has been trading back and forth around its 200-week simple moving average of $120.63, which is the "reversion to the mean." Weekly momentum is projected to slip to 66.80 this week, down from 71.70 a week ago. Buy weakness to my quarterly value level of $120.23, which was tested on Tuesday. My semiannual value level lags at $115.92. Sell strength to my weekly risky level of $125.61.

The Gold Bullion ETF (GLD)
The Gold Bullion ETF (GLD)

Courtesy of MetaStock Xenith

Comex gold traded as high as $1,297.4 on April 17, and then dipped to the 50-day and 200-day simple moving averages of $1,247.0 and $1,253.4 as a "death cross" remains in play. The "death cross" goes back to Nov. 21 when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices lie ahead. My monthly value level of $1,171.9 with a quarterly pivot is $1,233.2 with a weekly risky level of $1,303.7. My annual risky levels are $1,660.1 and $1,674.1.

Investors can trade gold like a stock using the SPDR Gold Shares ETF, which is backed by gold bullion.

The weekly chart for the gold bullion ETF (GLD) ($116.05 on May 9) will be downgraded to negative if the ETF ends the week below its key weekly moving average of $118.50 and below its 200-week simple moving average of $118.50, which is the "reversion to the mean". Weekly momentum is projected to slip to 67.58 down from 79.69 a week ago. Buy weakness to my monthly risky level of $111.66. My quarterly pivot is $116.89. Sell strength to my weekly risky level of $123.89.

The Utilities ETF (XLU)
The Utilities ETF (XLU)

Courtesy of MetaStock Xenith

Dow utilities remains above the "golden cross" confirmed on March 16. A "golden cross" occurs when the 50-day simple moving average trends above the 200-day simple moving average, indicating that higher prices lie ahead. The 2017 high is now 711.47 set on April 27. The utilities average is now below its 50-day simple moving average of 700.00. My monthly value level is 691.71 with a quarterly pivot of 704.56 and weekly and semiannual risky levels of 714.27 and 732.56, respectively.

Investors seeking the safety of dividends can trade the utilities ETF, which is a basket of 28 utility stocks.

The weekly chart will shift to neutral if the utilities ETF (XLU) ($51.33 on May 9) ends the week below its key weekly moving average of $51.36. The ETF is above its 200-week simple moving average, or the "reversion to the mean" of $44.71. Weekly momentum is projected to slip to 83.54, still above the overbought threshold of 80.00. Buy weakness to my monthly value level of $50.64. My annual, quarterly and weekly pivots are $50.72, $51.19 and $52.24, respectively. Sell strength to my semiannual risky level of $54.29.

The Junk Bond ETF (JNK)
The Junk Bond ETF (JNK)

Courtesy of MetaStock Xenith

The High Yield Bond ETF is for investors betting that junk bond yields will tighten against U.S. Treasuries. Remember that the performance of junk bonds correlates more to the stock market, not to the bond market.

The weekly chart for the junk bond ETF (JNK) ($36.94 on May 9) is positive with the ETF above its key weekly moving average of $36.88. The ETF has been below its 200-week simple moving average since the week of Nov. 14, 2014, with the average now at $38.05. Weekly momentum is projected to end the week at 70.25 up from 66.86 a week ago. Buy weakness to my semiannual and quarterly value levels of $35.14 and $33.00, respectively. My weekly and monthly pivots are $37.32 and $36.99. Sell strength to the 200-week simple moving average of $38.05.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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