A week ago, when Secretary of State Hillary Clinton was the odds-on-favorite to win the White House, "flight to safety" investments appeared to be regaining their sea legs as stocks were sliding into the close on Nov. 4. As the election swung in favor of Donald Trump on Nov. 9, all markets experienced extreme volatility. U.S. Treasury yields rose, gold lost its luster and utilities lost power. A warning came from junk bonds, which ended Nov. 4 with a negative weekly chart.
The yield on the 30-year U.S. bond rose to 3.035% premarket on Monday, the highest level since the year began. Charts provided warnings as this yield has been above its 200-day simple moving average since Oct. 27. The weekly chart has been favoring higher yields since the week of Oct. 7. Last week the 200-week simple moving average, the "reversion to the mean," was 3.053%. My value level for the remainder of 2016 is 3.296%, with this week's risky level of 2.720%.
Investors can trade the U.S. Treasury 30-year bond like a stock using the 20+ Year Treasury Bond ETF (TLT) , 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.
The reversal in Comex gold futures came as a shock, as gold had a positive weekly chart on Nov. 4. The overnight volatility on Nov. 9 tells the story. Gold futures traded as high as $1,338.3 the Troy ounce, then ended the week at $1,224.3 on Nov. 11. On Monday, gold futures have traded as low as $1,212.0. My value level or pivot for the remainder of the year is $1,215.7, as this month's risky level of $1,339.4 was nearly tested at the high.
Investors can trade gold like a stock using the SPDR Gold Shares ETF (GLD) , which is backed by gold bullion.
The Dow utility average ended last week at 627.82, with a "death cross" where the 50-day simple moving average fell below the 200-day simple moving average on Election Day. The close that day was $669.03, as the "death cross" indicated that low prices lie ahead. The weekly chart is now negative. Key levels of 635.23 and 670.81 have become risky levels for the remainder of 2016.
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 Nov. 4 with a negative weekly chart, which continued on Nov. 11. 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) popped to 6.2%, up from a gain of 2.3% last week. The weekly chart has been upgraded to neutral from negative. The "flight to safety" investments ended last week with the U.S. Treasury bond ETF, the gold ETF and the utility stocks ETF having mixed year-to-date performances vs. Spiders. Their year-to-date gains were slashed to 1.2%, 15.4% and 6.4%, respectively, down from 9.3%, 22.6% and 10.8%, respectively, on Nov. 4.
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 $122.04, up just 1.2% year to date, after being up 9.3% year to date on Nov. 4. Being below its 200-day simple moving average of $133.30 since Oct. 24 was a clear warning. After the election, the ETF crashed below its 50% and 61.8% retracements of $129.26 and $125.85, respectively, to a low of $121.65 on Friday. Note that this week will begin with a "death cross" as the 50-day simple moving average of $133.63 is poised to cross below the 200-day simple moving average of $133.59 to indicate that lower prices lie ahead.
Investors looking to buy the bond ETF should do so at the open on Monday, if it is below its key technical level of $122.31, which should be a magnet for the remainder of 2016. This strategy makes sense since the ETF has had a negative weekly chart since the week of Oct. 7. The weekly chart has become extremely oversold. Another warning was the fact that the ETF has been below my annual key level of $132.45 since Oct. 26.