The iShares 20+ Year T-Bond ETF (TLT) has recovered sharply from this morning's plunge, which more than any other market is warning us that perhaps the clamor to get back into riskier assets based on the yuan story is overblown.

The TLT's have climbed nearly $1 off this morning's gap-down low, in reaction to the yuan story and the exodus from "safety." Throughout the session, after the opening few minutes, it looks like Mr. Market has been reevaluating the wisdom of putting on more risk, given the impressive recovery rally in the TLTs. Purely from a technical perspective, this morning's low did not violate the prior pullback low at 96.04 and as such preserved the larger coil pattern off of the May 6 high at 100.00, which continues to argue for still higher TLT prices (lower longer-term rates), especially if and when the price structure hurdles 100.

Should the TLT sustain above 100, we will be finding out that the global economy is considerably weaker than is currently thought -- China included.

 

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.