One by one, the big losers of 2013 have rallied back. AAPL and Gold, Silver, and Gold Miners all bottomed near the end of July. Since then, they have been outperforming assets rather than dramatically underperforming assets.
Treasury bonds seem to be following a similar pattern, as they were left for dead at the start of August. Using TLT as a proxy, we can see the first significant upside volume push since the start of the one way selloff in May:
Granted, TLT is still well below its 50 day ma around 107.25, and its trend of lower lows and lower highs remains in place. I don’t have an interest in trying to pick a bottom just yet, but I do think the increased volume along with the improving momentum (RSI hit a 3 month high today) are the first signs of a bottoming process.
With that in mind, since I think there is still some time for this process to play out, I am on the lookout for a good entry on this structure:
Buy the Sept21st 102/106/110 Call Fly for $1.55.
The thought here is that TLT will be stuck between 103.55 and 108.45 over the next few weeks as bonds are increasingly transferred out of the hands of weak holders and into the hands of strong holders. For now, I am going to hold off, as I would prefer to initiate this structure closer to $1, which might happen if TLT has one more move lower in the next week.