One very curious aspect of the powerful upmove in the equity market during the past 24 hours is the lack of opposite selling pressure in the bond market and Lehman 20-year T-note ETF (TLT). If in fact last week's plunge in equities (into yesterday morning) aroused fears of an implosion, and with it a flight to safety in the bond market, then removal of such fears might be expected to reverse or eliminate the flight-to-safety premium. From the look and the behavior of the TLT's today, I have to wonder what is preserving the buoyancy of the long end of the Treasuries? Is it the prospect of a recession? Lower oil prices, and thus less inflationary pressure going forward? The need for additional FOMC rate cuts? An upside reversal in the dollar? Or could it be more sinister in nature? Such as continued fears that the credit crunch is not behind, or that perhaps a hedge fund or five could blow up if this advance in equities totally reverses? Who knows…but actions speak louder than words, right? So I am staying long the TLTs (the long end of the Treasury curve) for a while longer.



Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com, a real-time diary of his technical chart analysis and trading alerts on all major markets. For more of Mike Paulenoff, sign up for a free 15-Day trial to his MPTrader Diary by clicking here.