Has TLT Hit a Price Bottom?

Will Treasury yields go higher from here? The answer to that question comes in the form of a heated battle between buyers versus sellers of long-term Treasury ETFs. 

For a prime example, trading volume for the largest Treasury exchange-traded fund on the market, the iShares 20+ Year Treasury ETF (TLT), recently reached an all-time high as its price is near a historic low. 

Since yields and price have an inverse relationship, ETF investors are asking a related question: Is the TLT price bottom finally here? A closer look at trading volume and price history offers a few clues. 

Volume and TLT Price Direction  

High trading volume can be an indicator of an inflection point, which refers to a change in the direction of a trend or pattern in the market. The average trading volume of TLT is 36.9 million shares, which compares to 87.7 million shares reached on Oct. 19, marking the highest trading volume in the Treasury ETF's 21-year history. 

The 52-week price low for TLT is $82.42, which it touched briefly Monday morning before reversing higher after news that investing heavyweights Bill Ackman and Bill Gross are bullish on Treasury prices. 

Whether or not we’ve seen the TLT price bottom, buyers and sellers are sure to continue the battle for the answer in the days and weeks ahead. 

TLT Price Bottom and Technical Analysis: A Deeper Look 

Speaking of TLT price, the bear market low of $82.42 hit on Monday is just about 2.1% off its all-time low of $80.65, which was set in May of 2004. TLT was launched in July of 2002. Price history is significant, even if just for psychological reasons, because it can help to identify support levels for a low price or resistance levels for a high price. Some investors may feel that a historical low, or slightly above it, can be a good entry point for a long position. 

To identify a potential TLT price bottom, technical traders may take a deeper look at a combination of price, volume and market sentiment for early signs that show committed buyers are returning to a once-oversold security. Volume can add credibility to a security’s price and direction.  

Recent high trading volume around TLT’s technical support level, which most traders say is around $83.25, is where the battle between bond bulls and bears will be fought in the short term. If the bulls win, and can hold at or above that support, it’s possible a TLT price bottom is in, but a closing price much below that point could mean further downside is ahead. 

TLT Price Bottom Line 

It’s wise not to time market bottoms, as they are impossible to predict and not absolutely known until long after they are put in. The bottom for the current bond bear market, which has long-term Treasury ETFs like TLT down more than 50% from the peak price, will be determined by multiple factors.  

In the short term, investors and traders will watch economic indicators, such as inflation reports and related Federal Reserve policy that influence the short-term direction of yields and prices. Investors and traders may also watch market sentiment, and supply and demand factors for the Treasury market.  

For the long-term investor, there’s no question that TLT is much closer to a bottom than the top, so dollar-cost averaging, with periodic purchases at historic lows, can be wise at current levels if the strategy aligns with the investor’s risk tolerance, objectives and portfolio needs. 

Contact Kent Thune at [email protected].