USZ21 – December T-Bonds (Last:162^28)

The ‘not exactly bearish’ T-Bond chart featured in last week’s commentary was intended to make the point that the usual eggheads, pundits and nearly all forecasters have had bonds figured wrong for quite some time. They should be even more embarrassed and mystified by Friday’s spectacular rally, which made the daily chart look still less bearish (while paying off pass-line bettors with a quick, ‘mechanically’ earned $11,000). The same yo-yos have attempted to cover their tracks with talk about how bonds are moving higher because of a global ‘flight to safety’. But where, we should ask, was such talk back in November, when a steep rise in bond prices drew only skepticism from inflationistas? Looking ahead, the 168^15 rally target has been in play theoretically since mid-October, although the difficulties of overcoming p=162^25 have made the attainment of D any time soon less than certain. Whatever happens, the unwinding of overly enthusiastic bets on inflation will continue to lend buoyancy to Treasurys, presumably until a bear market in stocks creates a true flight to the safety of U.S. bonds. _______ UPDATE (Dec 1, 6:44 p.m. ET): The March contract is headed toward a short-term top at 163^30. Short aggressively there if you’ve been long for the ride up. Here’s the chart.