Bonds are rapidly approaching a major turning point and investors should pay close attention in the coming weeks. Why? A recent Bank of America survey highlighted the bearish positioning by most institutional managers: a heavy overweight in bonds proxies, such as utilities, consumer staples and REITs, and underweight exposure in equities, notably cyclicals.

My technical work continues to suggest investors are at risk of major reversals developing for which they are not positioned. An upside break-out in equities, supported by a broad-based improvement in cyclicals is taking hold while a downside move in bonds is a risk nearing reality. If they all head for the exits at once, it won’t be pretty.

The iShares 20+ year long bond ETF (TLT), featured below, is widely used as an easily traded bond proxy. Lower price highs are now in place, which is often a precursor to a trend shift. In addition, the TLT is now challenging its 20-week (100-day) moving average which is a reasonable proxy for trend.

I expected TLT will break the 20-week moving average at 138.44, which would be one more data point signaling the TLT’s uptrend is reversing. A break below the September 13th lows at 136.54 (equivalent of 1.90% on the US 10-year note) would confirm the TLT is in a downtrend by est...

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