TLT _ Sell the reflex rally towards resistance

The strength in equities is forcing the hands of bond owners to lighten up on their overweighted positions. I believe it makes trading sense to sell rallies in TLT and with the latest 3 point move up from this Monday's low providing us with a reasonable risk/reward entry level. The risk is roughly 3 points and the reward roughly the same. I view 114 as a better entry, but I certainly don't know if it will reach that high in this rebound. The market is buffeted by news in both directions lately, but given the "sense of relief" that I hear all day on tv and in the news that rates are not continuing their surge from last week, I believe this has provided a low-risk entry to sell bonds short here. If you are overweight in bonds, then this is a good time to lighten up and find other assets to replace your bonds in your portfolio.

It is possible that TLT will hold in or around these levels until Quarter-end is out of the way.

In previous charts of TLT from Dec 7th and in each one after, I made the point that I felt that the first quarter would be a rough one for bonds. It looks like this is going to happen. But I see more downside ahead. Once the 2nd quarter begins, I believe there will be a much stronger exodus from Long Term Treasuries. The rally in t-bonds put hundreds of billions in paper profits in the hands of bond owners and now they are substantially overweighted.

By Technical Tim, Friday, Mar 23, 2012
2:52PM EST