Bond Ratio and Targets

The ratio of HYG and TLT looks to be finally reversing. There is a gap on HYG near $75. A trip back to the 2007 ratio high map to TLT at $101. A trip back to the next resistance line gives a $105 target. If HYG goes higher, there are yet higher targets possible. A 50 percent retrace of the TLT drop since June gives a possible target of $105. Given this context, I see a fairly high probability of TLT moving above $100 as long as the general move in bonds is higher. What interests me about bonds is that, as I had expected this summer, eventually inflation and the broader economy weaken enough for an extended bond rally. That could produce targets upwards of $120, with a backtest of TLT's former long-term support possible up around $130 in the event of a disinflationary or better (for TLT), deflationary recession.