Sunday, 29 May 2016

TLT VS. DJIA - It's The Bond Market Stupid

Comparing the TLT to the Dow Jones Industrial Average it's quite possible that bond prices go up till August (meaning Yield goes down) but one thing is for sure... yield is going UP sometime in the near future. You can't predict the markets but money goes from one asset class to another and from one country to another then it gets narrowed down from there. The Ray Dalio All Weather Fund  is ingenious in it's simplicity yet gives you an idea of where money goes and the odds of it happening.

The stock market goes up, down  or sideways
If we know that bond yield is stupidly low and should go up, share prices are high and could go sideways or down ( or maybe even higher yet), gold (which is money) is low based on cost of production and lower confidence in government every day (just look at the American election, It's all about everyone pissed off at the people in government over the last couple generations), commodity prices are low based on the cost of production.

It's known that 62 people in the world own 1/2 of the worlds wealth that means 7 billion people own the other 1/2 of the worlds wealth. That's a hell of a freight train of money moving from one asset class to another. The big question is where's it going to go.

So.... Ray Dalio's All Weather Fund  65% bonds, 30% stocks, 7.5% gold and 7.5% commodities. There's a reason for this type of asset distribution, it's beta and volatility. It doesn't get any simpler than this. Does the money go from Bonds to stocks ( more than likely US high grade stocks -DJIA), bonds to gold? bonds to commodities? bonds to hard assets of everything?

One thing is for sure... the DJIA is looking bullish right now, but that could change.

The chart below shows a weekly chart with a breakout from a bull flag on the weekly chart as well as the price bouncing off of  support

The chart below shows TLT  iShares 20+ Year Treasury Bond ETF (The iShares 20+ Year Treasury Bond ETF seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than twenty years). It's revealing what could be a 5 wave wedge. If this is true, there will be no interest rate hike till this fall, then something is going to trigger this sell off... whatever that's going to be (this is all just probability of course)
TLT I Shares 20 year treasury bond ETF ascending triangle - May 26, 2016

The chart below is the DJIA. If we break out to new highs again we could see any type of target... take your pick.
Dow Jones Industrial Average projections - May 26, 2016

No comments:

Post a Comment