Markets enjoyed another session in green territory as investors welcomed the latest employment data with cheer. Weekly jobless claims came in better than expected, helping to bolster confidence levels ahead of today’s monthly employment report; this figure showed that 367,000 people filed for unemployment benefits versus the expected 370,000. Overseas, the ECB kept optimism alive by extending its low-rate policy and keeping the benchmark rate steady at 0.75% [see also How Warren Buffett Could End The Deficit in 5 Minutes].
Investors will shift their focus back on the homefront today as September’s employment data hits the street. As such, our ETF to watch is the iShares Barclays 20 Year Treasury Bond Fund (TLT, A-), which may experience volatile trading depending on how investors digest the latest insights into the health of the domestic labor market. Analysts are expecting for 110,000 nonfarm payrolls along with an uptick in the unemployment rate to 8.2% [see our Better-Than-AGG Total Bond Market ETFdb Portfolio].
TLT has endured a prolonged correction since shares hit an all-time high at $132.22 on July 25, 2012. Since late July of this year, demand for U.S. Treasuries has dropped off as “risky” assets have taken on appeal thanks to the ECB and Fed’s commitment to a low-rate policy. From a technical perspective, this ETF was expected to bounce off its 200-day moving average (yellow line) in mid-August; although this came to fruition, TLT went onto struggle at the $128 level and ultimately turned south and made a lower-low underneath its 200-day moving average on September 14, 2012 [see also 101 ETF Lessons Every Financial Advisor Should Learn].
The red trend line in the chart above suggests that selling pressures will likely continue in the coming days as TLT gears up to make a lower-low past the one set on September 14 [see also ETF Technical Trading FAQ].
Better-than-expected employment data can inspire a broad rally on Wall Street, which would likely create headwinds for safe haven assets; in terms of downside, TLT has support at $120 a share followed by the $118 level. A bearish surprise may however bolstered Treasuries higher as investors seek out refuge amid the uncertainty; in terms of upside, this ETF has major resistance around the $127.50 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
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Disclosure: No positions at time of writing.