Major U.S. equity indexes advanced cautiously higher on Wednesday as looming worries over Syria kept a lid on investors’ confidence while Apple’s (AAPL) lackluster performance on the day dragged on the S&P 500 Index. With few data releases slated to take place the rest of this week, all eyes are now fixed on next week’s Fed meeting, which takes place on the 17th-18th [see Visual Edition: The Original Businesses Of Dow Components].
Our chart to watch for today is the iShares Barclays 20 Year Treasury Bond ETF (TLT, B-), which could rebound on the day if the latest weekly jobs report bolsters demand for safe haven assets. Analysts are expecting for 330,000 jobless claims this week, which would mark a slight deterioration from the previous reading, which showed 323,000 people filing for unemployment benefits.
Consider TLT’s one-year daily performance chart below. This ETF has been sinking lower since the end of 2012 when Treasury prices topped out as TLT hit $127.19 on 11/16 following upbeat news that Obama would steer the nation away from the much-feared “fiscal cliff”; since then, investors have been rotating out of Treasuries and into cyclical stocks. The Fed’s hint of tapering on 5/22/2013 served as fundamental confirmation for TLT’s downtrend (red line), seeing as how a reduction in bond-repurchases would inherently drive longer-term rates higher and push bond prices lower [see 3 Market Valuation Indicators ETF Investors Must Know].
TLT appears to have established a bottom in recent days, judging by the fact that it’s holding above $102 a share; this ETF previously rebounded off the same support level (blue line) during late August of this year. Despite the attractive potential for upside here, we advise conservative investors to hold off from jumping in long given the longer-term downtrend at hand coupled with the looming reduction in bond-repurchases by the Fed [see Visual Guide To Major Index Returns By Year From 1970].
If the latest jobless claims report sends investors running to the safe havens for whatever reason, TLT should have the wind at its back on the day; in terms of upside, this ETF has near-term resistance between the $106 and $108 levels. On the other hand, very upbeat jobless claims data can spark a rally in the equity market; in terms of downside, TLT has immediate support at $102 a share, while a break below this level would likely welcome accelerating selling pressures. 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.