TBT While I Wasn't Particularly Looking

It has broken out of a symmetrical triangle it's been forming since October. It has even already backtested the upper line of the triangle, and it's now off to the races.

TBT is a double-short ETF on Treasuries 20-years and longer. It is a double-inverse of TLT. As those longer-dated Treasuries prices fall (thus their yields go up), TBT goes up.

There are even more leveraged inverse ETFs like triple-short 10-year Treasury (TYO) and triple-short 30-year Treasury (TMV) but they are very thinly traded for my liking.


It looks like I've missed the boat on this, but I think there's still some upside left on this leg. It can run up to $55 or so (target price derived from the height of the symmetrical triangle), where it meets a horizontal line that marks the previous resistance/support.

What's interesting to me is that TBT broke out and continues to go up, DESPITE the dollar strength (take a look at the top of the chart - that's US dollar movement). So, as I mentioned in the post a few days ago, the U.S. dollar "strength" doesn't mean investors are flocking to the U.S. dollar denominated "safety" assets like Treasuries. It is rather other currencies' weakness.

Silver Correlates Better With Yield Rise Than Gold

But copper and iron are outpacing the yield rise. For now.

The stock market is responding favorably to today's auction of 30-year Treasury bond, although it has come off the high of the day. (It is possible it will end up flat, yet again, like the past 4 trading days.)

But yields have been rising on long dated Treasuries, most notably 10-year note and 30-year bond. Treasury/Fed/Government spin is that the economy is recovering. Maybe. Maybe not. I also hear a lot of inflation talk, even hyperinflation talk. Jim Rogers has said that Dow could go to 100,000 (or some outrageous number like that), and a quart of milk could cost $10.

Even the staid broker like Fidelity (I use them) puts out an article about how to profit from falling US dollar and rising inflation. Their recommendation: gold, silver, commodities. (They also recommend REITs and TIPS, but never mind them for now.)

So I plotted gold (via gold ETF GLD), silver (SLV), 10-year note yield (TNX) and 30-year bond yield (TYX) on a 6 month daily chart. (I threw in Apple (AAPL) just for fun, and surprisingly it correlates to silver pretty well.) First to note is silver's outperformance over gold in the past 6 months. Second, notice how well silver correlates with the Treasury yields. SLV is a thin blue line buried among TNX, TYX, and AAPL.

So the better inflation trade is silver?

Maybe. Maybe not. This second chart adds a few more names - companies that deal in other metals: Freeport McMoran (FCX, copper), Rio Tinto (RTP, aluminum, copper, gold), Mechel (MTL, iron ore, coal, steel), and AK Steel (AKS, steel). They are all outpacing the Treasury yields.