Based on this long term view, it can be assumed that TLT is coming down from a peak and soon we will be seeing the mean reversion discussed above followed, more than likely, by the continuation of the cycle down to where TLT trades below its mean value.



ProShares offers two ETFs that allow an investor to play this trend:

1. UltraShort Lehman 7-10 Year Treasury (PST), based on the Lehman Brothers 7-10 Year U.S. Treasury Index
2. UltraShort Lehman 20+ Year Treasury (TBT), based on the Lehman Brothers 20+ Year Treasury Index

These ETFs were only introduced in May of this year so their track record is not very long; nevertheless, they are already proving to be quite popular. Both ETFs are in the top 50% of all ProShares ETFs in terms of average daily volume. (Read why this is important: ProShares ETFs - why trading volume makes a difference)

If you have read this far, you might be asking why bonds were up so strongly today if the longer term trend is down. "Flight to quality" is a term often used to describe how investors move into Treasuries when the stock market is in trouble. We have been seeing this over the last few months. Despite the perception of rising inflation, funds have poured into bonds whenever a major jolt hit the financial sector and the stock market plunged. As the stock market stabilized, the bond market weakened. Today, the stock market tumbled as investors received new evidence that real estate has not yet recovered. Keep in mind this just made PST and TBT cheaper.

Disclosure: none