This week's update on "flight to safety" investments shows that money appears to be flowing back into U.S. Treasury bonds, gold bullion and utility stocks. Junk bonds have topped out, following stocks lower. Overnight volatility has not violated the key levels for this week, but things could change following the results for Tuesday's elections.
The yield on the 30-year U.S. bond ended last week at 2.562% and traded as high as 2.631%, as the rise in yields has gone far enough for now. The weekly chart for bond yields shows the yield above its key weekly moving average of 2.480%, with the 200-week simple moving average -- the "reversion to the mean" -- at 3.054%. The weekly momentum remains above the 80.00 threshold.
Remember that when yields rise the price of the bond declines. This month's risky level is 2.307%, with a weekly pivot of 2.576%.
Investors can trade the U.S. Treasury 30-year bond like a stock using the 20+ Year Treasury Bond ETF (TLT) , which is an exchange-traded fund backed by 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.
Comex gold futures ended last week at $1,304.5 the Troy ounce, with a positive weekly chart. The nearby contract is above its key weekly moving average of $1,293.4 and above its 200-week simple moving average of $1,272.4, with weekly momentum rising above the oversold threshold of 80.00. This week's value level is $1,242.1, with this month's risky level of $1,339.4.
Investors can trade gold like a stock using the SPDR Gold Shares ETF (GLD) , which is backed by gold bullion.
The Dow utility average, which ended last week at 653.27, has a neutral weekly chart with the close below the key weekly moving average of 662.29 and well above the 200-week simple moving average of 568.14. The weekly momentum reading is rising above the oversold threshold of 20.00. Key levels of 635.23 and 670.81 remain in play until year-end.
Investors seeking the safety of dividends can trade the Utilities Select Sector SPDR Fund (XLU) , which is a basket of 28 utility stocks.
The SPDR Barclays High Yield Bond ETF (JNK) ended last week at $35.82 as the weekly chart shifts to negative, with the ETF below its key weekly moving average of $36.36 and well below its 200-week simple moving average of $38.62. The weekly momentum reading is declining below the overbought threshold of 80.00.
Investors betting that junk bond yields will tighten against U.S. Treasury bonds should keep in mind that the performance of junk bonds correlates to the stock market, not to the bond market.
The year-to-date gain for S&P 500 SPDR ETF (SPY) slipped to a gain of 2.3% year to date last week, down from 4.3% on Oct. 28. The weekly chart remains negative. The "flight to safety" investments ended last week with the U.S. Treasury bond ETF, the gold ETF and the utility stocks ETF outperforming the SPY ETF. Their year-to-date gains are 9.3%, 22.6% and 10.8%, respectively, vs. 8.2%, 19.8% and 12%, respectively, on Oct. 28.
Here's the daily chart for the bond ETF.
Courtesy of MetaStock Xenith
The horizontal lines on the daily chart show the Fibonacci retracements of the rally from the June 26, 2015, low of $114.88 to the July 8 high of $143.62.
The bond ETF ended last week at $131.74, up 9.3% year to date, but has been below its 200-day simple moving average of $133.30 since Oct. 24. The ETF has been below its 38.2% retracement of $132.66 since Oct. 26. Weakness to $129.88 on Nov. 1 is above its 50% retracement of $129.26.
Investors looking to buy the bond ETF should continue to do so on weakness to $129.00, which is a key level on technical charts until the end of this week. My annual level of $132.45 remains a magnet. Investors looking to reduce holdings should consider doing so on strength to $138.02, which is the risky level for the remainder of November.