• 287 days Will The ECB Continue To Hike Rates?
  • 287 days Forbes: Aramco Remains Largest Company In The Middle East
  • 289 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 689 days Could Crypto Overtake Traditional Investment?
  • 694 days Americans Still Quitting Jobs At Record Pace
  • 696 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 699 days Is The Dollar Too Strong?
  • 699 days Big Tech Disappoints Investors on Earnings Calls
  • 700 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 702 days China Is Quietly Trying To Distance Itself From Russia
  • 702 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 706 days Crypto Investors Won Big In 2021
  • 706 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 707 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 709 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 710 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 713 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 714 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 714 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 716 days Are NFTs About To Take Over Gaming?
Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

How Millennials Are Reshaping Real Estate

How Millennials Are Reshaping Real Estate

The real estate market is…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

  1. Home
  2. Markets
  3. Other

Let Me Beat This to Death One More Time

Ok, I have been bullish on Treasury bonds going all the way back toMarch, 2011, and this was a timely call. Over the past 9 months, strength in bonds has coincided with weakness in the economy. Yet, despite the fundamental reasons for stronger bond prices, bonds really have been consolidating since mid-August. In advance of the Federal Reserve' s "Operation Twist" announcement, bonds did run up rather nicely, but since then and over the last 4 months, bond prices have been range bond. Through all the ups and downs of the price action, my bond model has been steadfastly bullish, and from a technical perspective, I have identified several buy and sell points as prices consolidate within the highs and lows of this 4 month range.

Over the past two weeks, I presented articles (hereandhere) suggesting that bonds have "topped" out. I stated: "Treasury bonds should remain range bound at best or breakdown in the worse case scenario." Based upon the technicals, I felt it was worth reducing my bond position by one half until there was greater clarity. Owing to the positive fundamental picture and bond model, I felt it was worth having exposure to bonds.

But one week later, the technical picture has become rather compelling (i.e., greater clarity), so for the last time this year let me beat this bond issue to death just one more time. Figure 1 is a daily chart of the Vanguard Total Bond Market ETF (symbol: BND). The gold and black dots are key pivot points, which are the best areas of buying (support) and selling (resistance). The price range that extends all the way back to August is noted inside the gray rectangle. The close below and then above the most recent key pivot point at 83.35 is a bullish price pattern. Will it lead to a break out from this price range? Difficult to know of course, but the fundamental picture (i.e., economic weakness) remains supportive of such a move. If a breakout were to happen, I suspect it would be rather dramatic owing to the prolong period of consolidation.

Figure 1. BND/ daily
BND Daily Chart

 

Failure of this analysis will be heralded by a breakdown in prices below the 82.86 key pivot level.

 

Back to homepage

Leave a comment

Leave a comment