The Recent Surge of Defensive Money into Bonds and Gold

Jun 16, 2016: 10:13 AM CST

If you’re only watching stocks, you’re likely missing a big surge of money flooding into a defensive “Risk-Off” position.

Let’s look at where the “Big Money” is flooding – defensive Bonds and Gold:

Big Buyers rotated money rapidly into Treasuries, seen here with the 10-Year Treasury Note.

You can also chart – or trade – TLT or IEF (ETF Funds) for a similar picture.

Treasury prices surged in January/February, then burst higher again into June.

When money rapidly floods into Bonds/Treasuries, it can suggest wider underlying about the stock market or economy.

If funds believe “all is well,” then they’ll commit more capital to “Risk-On” markets like stocks and often Oil.

That’s not what’s happening here.

With the Federal Reserve backing-off of their pledge to raise interest rates four times in 2016 (which absolutely will not happen), Treasury prices are responding bullishly.

The higher price rises, the lower the Yield falls.

We’re seeing a similar picture in Gold which can serve both as a Risk-On AND a Risk-Off Market:

Like Treasuries, we’re seeing a surge of persistent buying in January/February, a pullback, and a fresh new surge into June.

These markets are positively correlated at the moment and currently serve as “Risk-Off” or defensive markets.

Not only did Gold break above the $1,300 level, it did so today on a powerful Trend Day higher.

Take a moment to view our prior update on Gold “Gold Surges to Fresh New High Target.”

What’s the point of watching these markets if you don’t trade them?

It gives us a clue that “Big Money” may be rotating more defensively in their portfolios/accounts.

We extend the logic that they’re doing so in part because they may not be confident about the near-term future of the stock market or broader economy.

Continue to watch the defensive markets of Gold and Treasuries which compete for money/assets from the “Risk-On” Markets such as the Stock Market and Oil (both of which are down sharply today).

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Corey Rosenbloom, CMT

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3 Responses to “The Recent Surge of Defensive Money into Bonds and Gold”

  1. Shocking and Stellar Reversals Today in All Markets | Afraid to Blog Says:

    […] For some perspective, take a look at this morning’s “Treasuries and Gold” update post. […]

  2. Strong Pro-Trending Movements Reversed into Counter-Trend Reactions - Says:

    […] For some perspective, take a look at this morning’s “Treasuries and Gold” update post. […]

  3. Steven Says:

    I think these pulls backs or pushes are ideal for us to gain quick profits, if we are able to spot it correctly then we will be able to gain a lot easily, but if we are unable to do that then we will definitely have hard time to manage things. I love trading in this way and have set S/R on my charts, it’s very handy especially with help of OctaFX broker and their tidy spreads, high leverages and many such features, it’s seriously cool and handy.