After a 60% rally from its 2018 lows, I think a cycle peak is in for the TLT Bond ETF. This ETF, which is one of the most widely owned bond proxies, is showing technical evidence of establishing a cycle top. And as usual, history provides us some valuable insight.

Take a look at long-term momentum oscillator in the top panel of the chart below. This is a useful technical tool that signals longer-term trend shifts in markets. Similar to peaks in Q4 2016, Q1 2015, Q3 2012 and Q2 2009, it is in the early stages of turning down from overbought levels. I think this is a signal that bonds have established their highs for this cycle and a is call for investors to reduce exposure.

Interestingly, in addition to the TLT’s monthly momentum signaling a cycle peak, its price is showing evidence of peaking at the upper of range the +2 standard deviation band of its 2008-2020 price uptrend. As demonstrated below, this +2 standard deviation band has served as reasonable caution zone for bonds at prior cycle peaks since 2008. I think it will continue be for this cycle as well.

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Bottom line: The TLT bond ETF is exhibiting the type of technical behavior that often develops at a cycle high and I think it is time to reduce bond exposure. I recommend investors redeploy those funds into ...

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