Inflation Trade Observations

Too far, too fast for the ‘inflation trade’?  Inflation trades are approaching significant price levels and exhibiting extreme momentum levels consistent with at least a pause in the underlying trend.

@JamieSaettele

Discount Offer!

 

U.S. GOVERNMENT 30 YEAR YIELD

U.S. Government 30 Year Yield

The 30 year U.S. yield is one of the purest representations of the ‘inflation trade’.  The yield bottomed in March (along with everything else) right at the full extension from the channel that originates at the 1987 high.  I’ve misjudged the speed and strength of the rally but 2.44 looms as the biggest test since the low.  This is the center line of the noted channel and the November 2019 high.  A move back to the lower parallel, which has been significant, wouldn’t surprise.  That is about 1.69.  A zoomed in chart is below.

U.S. GOVERNMENT 30 YEAR YIELD

U.S. Government 30 Year Yield

TLT DAILY

TLT Daily

TLT tagged the March low today (also the 2015 high).  Big spot.  RSI is 20.97.  Readings this low (magenta dots) are rare and have occurred either at or just before big lows (see the chart below as well).  Remember, lower TLT indicates higher yield and higher TLT indicates lower yield.  In other words, this chart ‘fits’ with the 30 year yield chart.

TLT DAILY

TLT Daily

COPPER WEEKLY

Copper Weekly

Copper is another pure inflation trade asset.  Price is closing in on the underside of the long term trendline (log scale) that was resistance in 2017 and 2018.  Daily RSI is almost 88!  Readings this high have occurred at or near price tops except for April 2006, when copper dropped for 2 weeks before going into a blowoff.

COPPER DAILY

Copper Daily

COPPER DAILY

Copper Daily