U.S. T-Bond Prices - Weekly Chart Buy Signal ?

A weekly chart buy signal was triggered in my computer-based trading system at Friday's close in the U.S. T-Bond ETF (symbol TLT, please see chart below).

How is this possible given the following:

1. The U.S. Census Bureau reported this past Friday morning that its third estimate of third-quarter U.S. gross domestic product (GDP) rose at an annual rate of +4.1%. That was sharply higher than the 2.5% growth rate for the second quarter and significantly better than the second estimate issued only two weeks ago calling for an increase of +3.6%. The Census Bureau said that the jump was due to larger personal consumption expenditures (PCE) and nonresidential fixed investment. (Normally considered bearish news for T-bond prices.)

2. The Federal Reserve announced last week that it will soon begin to scale back it's monthly purchases of Treasury securities and Mortgage-backed obligations (the infamous Taper). (Normally considered bearish news for T-Bond prices.)

3. There is a near-universal view right now that economic conditions in the U.S. and across the globe are continuing to improve, with expected lower unemployment rates, greater investment, and increased productivity. (Normally considered bearish news for T-Bond prices.)

Of course, in the world that I see, the buy signal in T-Bond prices makes perfect sense! And here's why:

1. I believe that U.S. economic growth is about to slow dramatically from the 3rd quarter pace of +4.1%.

2. The U.S. stock market is about to experience a violent correction.

3. The CBOE "Skew" Index rose above 140 for only the 4th time in history this past Friday. The Skew Index basically measures option premium levels within the S&P 500 Index for extreme out-of-the-money exercise prices. An average Skew reading is 115 according to the CBOE. Extreme readings (>140) suggest that "smart money" traders believe there may be an increased probability of a so-called "black swan" event.

4. JP Morgan is attempting to limit potential losses on its clearing of Target debit and credit cards following a major security data breach involving 40 million Target cards. JP Morgan is limiting cash withdrawals and also spending purchases. Not exactly the best timing for this sort of SNAFU.

5. For bullish stock investors, there is no "Wall of Worry" to climb now. However, this fact is NOT bullish! All the "Good" news is already priced into share prices. Any potential "Bad" news, like disappointing corporate earnings or a negative liquidity event (JP Morgan?), will be quickly met with an avalanche of selling and lower stock prices.

Bottom line: Coming into Friday, T-bond prices were oversold on a technical basis and sentiment indicators reflected too much bearishness among often-wrong trading groups. A rebound should not have been a surprise, but I was surprised none-the-less. It's not hard to imagine that T-Bond prices will continue to rebound as shorts cover and legitimate "flight-to-quality" issues present themselves over the near term. Gold/Silver mining shares continue to look extremely attractive to me, and the overall U.S. stock market (as measured by the S&P 500 Index) continues to look vulnerable to a major correction. In the interest of full disclosure, I am long Gold/Silver mining shares and short the S&P 500 in the accounts I manage.

U.S. T-Bond ETF (symbol TLT) Weekly Bar Chart with Computer-based Buy & Sell Signals