Higher yields, weaker gold and utility stocks have hurt "flight to safety" investments.
The rise in the 30-year bond yield held its 200-week simple moving average at 3.05% over the past two weeks. And the gold bullion exchange-traded fund held its 61.8% Fibonacci retracement level of $112.04 on Friday.
The yield on the 30-year U.S. bond rose to as high as 3.091% on Nov. 23, a new high for 2016. This yield is up more than 50 basis points since the election, which indicates a high probability that the Federal Reserve Open Market Committee will raise the federal funds rate following their last meeting of the year on Dec. 14.
Will this make Fed Chief Janet Yellen the Grinch who stole Christmas? All consumer-related rates would rise quickly after a rate hike. Folks looking to buy a new home for the holidays would be hit with a mortgage rate above 4%, just as the housing market was showing signs of growth.
Investors looking to lock in a bond yield that competes with stock dividends should consider doing so if the 30-year yield rises to 3.162% this week and to 3.296% by the end of the year.
Investors can trade the U.S. Treasury 30-year bond like a stock using the 20+ Year Treasury Bond ETF (TLT) , which is an ETF 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 traded as low as $1,170.3 the Troy ounce on Friday, down 12.5% from the election high of $1,338.3 on Nov. 9. If you are buying gold jewelry as holiday gifts, make sure to ask for a 12.5% discount. This week's value level is $1,153.3, and my monthly 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 a stabilizing 639.95 after trading as low as 616.19 on Nov. 14. Keep in mind that a "death cross" was confirmed on election day, when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices are likely ahead. The 200-day is now at 666.30. The utility average has returned to my range of key levels of 635.23 and 670.81, which remain magnets for the remainder of 2016. This week's value level is above the Nov. 14 low at 620.87. 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 $35.40 and its 50-day simple moving average of $36.30. 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 -- hence the recent tightening of spreads. Be careful as junk bonds are trying to stabilize within a junk bond bubble.
The year-to-date gain for S&P 500 SPDR ETF (SPY) rose to 8.7% last week, up from 7.2% on Nov. 18, and the weekly chart remains 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 year-to-date gains of 0.2%, 11% and 9%, respectively, vs. 0.2%, 13.6% and 7%, respectively, on Nov. 18.
Here's the weekly chart for the bond ETF.
Courtesy of MetaStock Xenith
The weekly chart remains negative but oversold, with the bond ETF below its key weekly moving average of $127.58. It tested its 200-week simple moving average of $120.15 with a week's low of $119.25.
The weekly momentum reading declined to 8.99 last week, down from 11.48 on Nov. 18, falling even deeper below the oversold threshold of 20.00.
Investors looking to buy the bond ETF should do so at the 200-week simple moving average of $120.15, and could have done so last week. This week's value level is $117.73, and 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.