"Flight to safety" investments have weakened significantly over the past two weeks. This week opens with the 30-year bond holding its 200-week simple moving average at 3.053%. Comex gold held its June 3 low of $1,201.5 the Troy ounce. Here's how to trade the recent volatility.
The yield on the 30-year U.S. Treasury bond, rose to as high as 3.067% on Nov. 14, testing its 200-week simple moving average for the first time since the week of July 17, 2015, when the average was 3.151%. My value level for the remainder of 2016 is 3.296% with this week's pivot at 2.993%.
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 to 30 years. As a stock-type investment it never matures and interest income is converted to periodic dividend payments.
Comex gold futures traded as low as $1,201.3 on Nov. 18. There's a "death cross" forming on the daily chart suggesting that lower prices lie ahead. This week's value level is $1,168.9 with a quarterly pivot of $1,215.7 and monthly 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 ended last week at 627.28 after trading as low as 616.19 on Nov. 14 after a "death cross" was confirmed on Election Day. A "death cross" occurs when the 50-day simple moving average falls below its 200-day simple moving average indicating that lower prices lie ahead. 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) trades between its 200-day simple moving average of $35.31 and its 50-day simple moving average of $36.30. Investors betting that junk bond yields will tighten against U.S. Treasuries 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) rose to 7.2% last week up from 6.2% last week. The weekly chart is positive. 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 versus Spiders. Their year-to-date gains slipped to 0.2%, 13.6% and 7%, respectively, versus 1.2%, 15.4% and 6.4%, respectively, on Nov. 11.
Here's the weekly chart for the bond ETF.
Courtesy of MetaStock Xenith
The weekly chart is negative but oversold with the bond ETF below its key weekly moving average of $129.27 and nearly tested its 200-week simple moving average of $120.14, which was nearly tested on Friday. The weekly momentum reading declined to 11.48 last week down from 13.58 on Nov. 11, falling deeply below the oversold threshold of 80.00.
Investors looking to buy the bond ETF should do so at the 200-week simple moving average of $120.14. The $122.31 level should act as a magnet (or pivot) until the end of 2016. Investors looking to reduce holdings should do so on strength to my annual pivot of $132.45.
Here's the weekly chart for the gold ETF.
Courtesy of MetaStock Xenith
The weekly chart is negative with the gold bullion ETF below its key weekly moving average of $120.65 and below its 200-week simple moving average of $121.89. The weekly momentum reading slipped to 25.54 last week down from 27.70 on Nov. 11.
Investors looking to buy the gold EFT could have done so at $115.64 last week. This level remains as a key level on technical charts until the end of 2016. This week's value level is $111.79. Investors looking to reduce holdings should consider doing so on strength to $127.38, which is a key level on technical charts until the end of November.