If SHY is rising and TLT is falling in value, the yield curve is steepening.
In the interest of full disclosure I and my subscribers have a position in TLT.
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Just pull up a chart for the past several years comparing the SPY, GLD and TLT.
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Look at the chart of the TLT to see how long bonds have performed.
The weekly chart shows that TLT has also retested the breakout level from May (line f).
Also, US Treasuries were slightly up, with iShares Barclays 20 Year Treasuries (NYSE: TLT) rising 0.90 percent.
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It is because of this, I have gone long the iShares 20 Year Treasury Bond Fund (TLT).
The other point occurred in mid-August when the performance of the TLT dropped below that of GLD.
By August 15, TLT was up only 0.6% for the year, and GLD was crossing above TLT.
The iShares 20-year bond ETF TLT declined 13% from its peak last summer to its low last month.
The uptrend for TLT (line f) signals that longer-term rates are moving lower.
If SHY is falling and TLT is rising, the yield curve is flattening.
At the moment, it also gives an interesting perspective of TLT and the current status of the bond market.
On the other hand, TLT was down just over 9% by March 19, while SPY was up over 12%.
Just two days later, the performance of SPY moved above that of TLT.
The iShares 20-yr bond etf, symbol TLT, has gained more than 5% in the five weeks since its early February low.
On September 13, TLT dropped below the zero line, while GLD was showing a 12.7% gain and SPY was up 14.7%.
Nonetheless, long bonds like those in the TLT, continue to chug higher.
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The first occurred in July when the performance of the SPY moved well above the performance of TLT which represents the bond market.
As the 2012 performance chart indicates, TLT is back in positive territory for the year, as it bounced after hitting the zero line two weeks ago.
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The 30-year bond has already lost 11.7%, while the popular 20-year bond etf TLT has lost 16.2% of its value since its peak in early September.
It shows that TLT is up 33.7%, with GLD now only up 15% (it was up over 37% in August), and SPY currently down for the year.
You can also put on a leveraged pairs trade, by going long TBT, short TLT if you believe he will be bearish on bonds, and vice-versa if he is bullish.
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