As spirited as the recent snapback rally in Treasuries has been for contrarians, it is concerning to me that some of the more rate-sensitive yield plays have actually weakened–The REITs, staples, and utilities are all sporting ETF daily charts, below, to support that last sentence.
The carnage is even more disturbing on individual charts of CPB GIS K KO PEP, etc.. Those are stocks I have mentioned before as being under pressure, but I figured a rally in Treasuries would snap the back higher. In addition, many homebuilders have had trouble sustaining snapback rallies.
My read on this is that the rally in Treasuries remains suspect, particularly given the damage suffered earlier this year. A bond rally failing here, with rates obviously spiking back higher, would almost assuredly put The Fed in the compromised position of actually needing to increase asset purchases this year (in stark contrast to any notion of tapering anytime soon, even as soon as early-2014). Indeed, the poker game would escalate rapidly in the bond market.
One step at a time, though, with the $106.20 area on TLT needing to now hold as support.
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Touche!