The charts on this popular bond ETF are improving as volatility increases, says Katie Stockton
When volatility increases in the equity market, traditional safe haven assets like commodities (e.g., gold) and bonds can often act as a buffer for portfolios. Bond prices have stabilized since making a bear cycle low in late 2023 and offer attractive yield. For one, the popular iShares 20+ Year Treasury Bond ETF (TLT) has an indicated yield of 4.14%. The ratio TLT to the S & P 500 Index (SPX) has improved intermediate-term momentum in response to an intermediate-term counter-trend ‘buy’ signal from the DeMARK Indicators. We liken the setup in the ratio to November 2023, June 2024, and February 2025. All three times TLT saw a phase of improved relative performance versus the SPX over the next 2-3 months. While we expect bonds to outperform stocks in the short term, we view it as counter-trend since the ratio has a declining 40-week moving average (MA). In absolute terms, TLT broke out above its 40-week MA in September and saw its weekly MACD turn positive, both of which were promising intermediate-term developments. Long-term momentum is improved per a recent “golden cross,” where the 50-day MA crosses above the 200-day MA. Although the broader trend for TLT can be best described as neutral below long-term trendline resistance near $96.40. Before adding exposure to any asset, it is best to have a fresh technical catalyst to work with in absolute price terms. TLT has a daily MACD buy signal, as well as the support of the rising daily stochastic oscillator, which increases the chances of a minor breakout above the September peak near $90.50. Should this occur, it would be a short-term bullish development targeting the secondary resistance at the February peak near $92.50. Initial support for TLT is defined by the confluence of the 50- and 200-day MAs in the $88.00-$88.30 zone. —Katie Stockton with Will Tamplin DISCLOSURES: None. 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