Not only did the bullish frenzy of the past week see a mad dash into the U.S. equities market, it also resulted in a notable retreat in the bond market.

Since peaking in late June at $132.22, the iShares Barclays 20+ Year Treasury Fund (NYSE:TLT) has fallen 5.4% to $125. Along the way, TLT also breached the pivotal 50-day moving average for the first time in four months.

Click to Enlarge While bulls likely are pointing to the downdraft in Treasury bonds as yet another piece of evidence supporting an improving backdrop for stocks, I think it’s a bit premature to declare the bond bull dead.

In the short term, the selloff in bonds might have gotten a bit ahead of itself and be due for a rebound. In addition to being a bit oversold, the TLT also is sitting at a significant support level and formed a bullish hammer candle in Thursday’s trading session.

Traders willing to bet the TLT won’t fall dramatically from current levels might consider selling an out-of-the-money bull put spread for September expiration.

For example, traders could enter a Sep 120-115 put spread by selling to open the 120 put and buying to open the 115 put for a net credit of 62 cents or better. The max reward is limited to 62 cents and will be captured as long as TLT remains north of $120 at September expiration. The max risk is limited to $4.38 ($5 – $0.62) and will be incurred if TLT sits beneath $115 at expiration.

Traders willing to make a more aggressive bet could modify the position to higher strikes (i.e. 121-116 or 122-117) to generate a higher net credit.

As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.