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The Treasury Bond, Gold Bullion, Utilities ETFs Stabilize, Commodities And The Dollar Rebound

“Flight to safety” investors concentrate on the exchange-traded funds associated with U.S. Treasury bonds, gold bullion and utility stocks, but also trade commodities and the dollar.

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The Treasury Bond ETF (TLT) traded to its 2017 high of $129.56 on Sept. 7, and then declined to $122.42 on Oct. 25. The ETF fell below its 200-day simple moving average, now is back above it as it rose to $123.39 last week.

The Gold Bullion ETF (GLD) set its 2017 high of $128.32 on Sept. 7, and then crashed to $119.78 on Oct. 6. GLD remains above its 200-day simple moving average, which rose to $119.87 last week.

The Utility Stock ETF (XLU) set its all-time intraday high of $55.90 on Sept. 11, and then traded as low as $52.57 on Sept. 28 establishing a trading range. XLU remains well above the 200-day simple moving average, which rose to 52.57 last week. The Dow Jones Utility Average set an all-time intraday high of 755.71 last week, XLU did not.

The Junk Bond ETF (JNK) set its 2017 high of $37.46 on July 26, and then traded as low as $36.68 on Aug. 8, establishing a trading range. JNK fell below its 200-day simple moving average of $37.04 on Thursday and Friday.

The Commodities ETF (GSG) set a post-election low of $13.16 on June 21, and this heavily-weighted to energy futures ETF traded as high as $15.71 on Nov. 11 on the positive effect of the “golden cross” that was confirmed on Oct. 20 when the stock closed at $15.01. A “golden cross” occurs when the 50-day simple moving average rises above 200-day simple moving average indicating that higher prices lie ahead.

The Dollar ETF (UUP) traded to its post-election low of $23.66 on Sept. 8 and rebounded to as high as $24.75 on Oct. 27. Its 50-day simple moving average held at 24.11 on Oct. 11 and its 200-day simple moving average is $25.05.

The 20+ Year Treasury Bond ETF (TLT)

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The U.S. Treasury 30-Year Bond ETF trades like a stock using the 20+ Year Treasury Bond ETF, which a basket of U.S. Treasury bonds with maturities of 20+-Years to 30-Years. As a stock-type investment it never matures, and interest income is converted to periodic dividend payments.

The weekly chart for the Treasury Bond ETF ($125.64 on Nov. 3) is neutral with the ETF above its five-week modified moving average of $125.06. The ETF held its 200-week simple moving average of $123.16 at its low two weeks ago as the “reversion to the mean”. The 12x3x3 weekly slow stochastic reading fell to 29.84 last week up from 32.91 on Oct. 27.

Based upon this analysis, buy weakness to my weekly and annual value levels of $123.63 and $105.77, respectively, and reduce holdings on strength to my monthly and quarterly risky levels of $126.77 and $130.26, respectively.

The Gold Bullion ETF (GLD)

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Investors can trade gold bullion like a stock using the SPDR Gold Shares ETF.

The weekly chart for the Gold Bullion ETF ($120.62 on Nov. 3) is negative with the ETF below its five-week modified moving average of $121.98. This ETF remains above its 200-week simple moving average of $117.95, which is the “reversion to the mean” last tested during the week of July 21 when the average was $118.29. The 12x3x3 weekly slow stochastic reading declined to 37.94 last week down from 47.13 on Oct. 27.

Based upon this analysis, buy weakness to my weekly and semiannual value levels of $117.60 and $108.60, respectively, and reduce holdings on strength to my monthly and quarterly risky levels of $122.46 and $128.86, respectively.

The Utilities ETF (XLU)

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Investors seeking the safety of dividends can trade the utilities ETF, which is a basket of 28 utility stocks.

The weekly chart for the Utilities Sector ETF ($55.21 on Nov. 3) remains positive with the ETF above its five-week modified moving average of $54.45. The 200-week simple moving average is the “reversion to the mean” at $46.65. The 12x3x3 weekly slow stochastic reading rose to 63.16 last week up 57.66 on Oct. 27.

Based upon this analysis, buy weakness to my weekly and annual value levels of $53.85 and $50.72, respectively, and reduce holdings on strength to my quarterly and semiannual risky levels of $57.22 and $57.58, respectively. My monthly pivot is $54.96.

SPDR Bloomberg Barclay’s High Yield Bond ETF (JNK)

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Investors should avoid junk bonds as they correlate more to stocks than U.S. Treasuries.

The weekly chart for the junk bond ETF ($37.00 on Nov. 3) has been downgraded to neutral from positive with the ETF below its five-week modified moving average of $37.15. The ETF is below its 200-week simple moving average or the “reversion to the mean” of $37.67 last tested during the week of Nov. 14, 2014 when the average was $40.08. The 12x3x3 weekly slow stochastic reading inched up to 69.75 last week up from 69.69 up from 66.31 on Oct. 27.

The weekly chart shows how the junk bond bubble popped from a high of $41.81 in June 2014 to as low as $31.27 during the week of Feb. 12, 2016. This decline of 25% was followed by the rebound that has been stalling below its “reversion to the mean” since the week of July 28, even as the stock market was setting new highs. This divergence is a huge warning for the stock market.

Based upon this analysis, buy weakness to my semiannual value level of $35.47, and reduce holdings with this ETF between my quarterly and monthly pivots of $36.74 and $37.25, respectively.

iShares S&P GSCI Commodity-Indexed Trust ETF (GSG)

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The commodity ETF is heavily-weighted to energy by about 60%.

The weekly chart for the commodity ETF ($15.71 on Nov. 3) remains positive but overbought with the ETF above its five-week modified moving average of $15.04. The ETF is well below its 200-week simple moving average or the “reversion to the mean” of $19.82, last tested during the week of July 11, 2014 when the average was $33.40. The 12x3x3 weekly slow stochastic reading rose to 87.79 last week up from 84.25 on Oct. 27, and moving further above the overbought threshold of 80.00.

The weekly chart shows how the commodity bubble popped from a high of $34.33 in June 2014 to as low as $12.03 during the week of Jan. 22, 2016. This decline of 65% was followed by a sideways to up pattern that regained momentum as September began. This is a warning that inflationary pressures are starting to simmer below the surface, which could lead to higher interest rates when Jerome Powell takes over as Fed Chief in February.

By then there could be a giant sucking sound as the Fed’s un-printing of money picks up momentum. The current unwinding of the Fed’s balance sheet totals $10 billion a month and is scheduled to rise to $20 billion a month as Powell takes the helm. By the end of 2018, the Fed will be flushing $50 billion a month down the drain. In 2016, the Federal Reserve gave $92 billion in profits to the U.S. Treasury. We sure could use the proceeds from balance sheet unwinding to help shore up healthcare reform, make tax reform more generous and begin to pay for infrastructure spending.

Based upon this analysis, buy weakness to my monthly and quarterly value levels of $13.99 and $12.40, respectively, and reduce holdings on strength to my annual risky level of $22.73.

PowerShares DB US Dollar Index Bullish ETF (UUP)

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Investors interested in buying the dollar versus a basket of currencies trade this ETF. It includes below long the dollar vs. Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

The weekly chart for the bullish dollar ETF ($24.69 on Nov. 3) is positive with the ETF above its five-week modified moving average of $24.37 and above its 200-week simple moving average or the “reversion to the mean” of $24.37. The ETF has been above this key moving average for the past two weeks. The 12x3x3 weekly slow stochastic reading rose to 70.22 last week up from 59.78 on Oct. 27.

The dollar weakened from $26.83 during the first week of 2017 to as low as $23.66 during the week of Sept. 8. This decline of 11.2% correlated to better than expected earnings from multinational companies for the first three quarters of 2017. The rising dollar since September could be a drag.

Based upon this analysis, buy weakness to my monthly and annual value levels of $23.40 and $22.89, respectively, and reduce holdings on strength to my semiannual risky level of $27.01. My quarterly pivot is at $24.95.

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