Bond Funds Flying High? 4/7/13

TLT gapped up Friday morning. TLT is a long term treasury bond Exchange Traded Fund or ETF that can be traded like a stock. See attached chart below.

When was the last time TLT behaved like a high flying tech stock and gapped up in the morning open?? Well the answer to that is April 9^th 2012. And what happened after that? TLT rose for the next 2-3 months while the market corrected itself and the S&P500 (ETF known as SPY) dropped by about 7-8%.

I am getting a little ahead of myself here. I do not want to be a predictor – in fact I have vowed to stop looking at other people’s predictions because it throws me off my own game plan. Information like that sticks in my brain and when I try to act on my own technical charts, I will pause or do something different based on what some other market Guru said. I need to free myself of those talking heads. They are like shackles that tie me down. Bite me! So I vow to only follow my own technicals…I will live and die by my own charts. So now do I want to be a predictor of things to come? Not really. Just that my bond fund charts are showing an Up signal and I will look to get in on a dip. I should have entered a position at the first sign but I did not. Mentally I was thinking bonds are in for a collapse. But that too is an opinion. Ignore opinions. What does the chart say? Up and its pretty clear signal.

GLD is still down but I will keep a watch on it to see if it perks up.

The other action I took was I sold vertical call spreads on SPY early last week against some small long positions I took. The long positions look weak but they are hedged with the sold call spreads. The week before. I was getting close to having to correct the first position but not needed as of now. Selling call spreads is profitable when the market goes sideways or down. It is a soft hedge of long positions except unlike buying a put which I will call a harder hedge, you make money if the movement is sideways or modestly down, as time value erosion is in my favor.

Will the market finally correct? It has been pointed up for a while now; and still does. First warning sign was the price divergence on SPY that I wrote about, and now the TLT type funds flying high… Careful.