Pullbacks seem to last no more than two days, so perhaps that was it? Even so, the last rally, a two-week spree, was so steep that I'd be surprised if TLT is about to embark on a follow-through so quickly. A buy signal would be tripped in any event at 126.00 for a move to at least 127.80, the midpoint resistance of pattern easily discernible on the daily chart, where A=120.13 on 12/03. A still larger pattern begun from September's lows projects to 133.16, so there are at least two good reasons to remain aggressively bullish when trading this vehicle. I'll provide real-time guidance in the chat room for anyone interested, since climbing aboard using night-in-advance information would be difficult at best. _______ UPDATE (12:10 p.m. EST): We're looking at buying Jan 127.50 calls -- tightly stopped -- with TLT trading at or very near 124.76, a promising midpoint Hidden Pivot support.
Monday, December 22, 2014
Our Very Contrarian Bet: 30-Year at 1.74%
– Posted in: Commentary for the Week of March 8 FreeNothing in the technical picture has changed since we shouted “Buy T-Bonds!” from the rooftop in October. A commentary published at the time bore the headline Inflation, Deflation, and Our Very Confident Bet in T-Bonds. The bet has become even more enticing since then, mainly because even more investors have lined up on the wrong side of it. Wall Street, hedge funds, paper-shufflers, LBO artistes, TV pundits and economists all seem convinced the Fed will raise rates in 2015. The Wall Street Journal added to the drumbeat with an article asserting that it’s not a matter of whether the Fed will raise rates, but when. Oddly, the only mainstream pundit on our side of the argument is Paul Krugman, an economist with whom we’ve never agreed about anything before. He thinks tightening would be ill-advised because the U.S. economy is not nearly as strong as the spinmeisters would have us believe. That would be putting it mildly. If the monetary hawks are right, we should be shorting Treasury paper up the wazoo rather than loading up on it, since bond prices move inversely to yields. We’ll take the odds. If ever there were a time to bet against the herd, this is it. It’s not a case of the smart money being dead wrong; it’s that the smart money is going to get crushed when it panics to unwind their epic mistake. Since every borrowed dollar is essentially a short position against the dollar, a day of reckoning logically awaits in the form of a dollar short-squeeze. Realize that all who have borrowed dollars, included mortgage debtors, are implicitly hoping they will be able to repay their loans in dollars cheapened by inflation. Deflation produces the opposite result, and merely because that result would wreck the global financial system is
