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-- Posted Thursday, 19 August 2010 | Digg This Article | | Source: GoldSeek.com
Rick’s Picks Thursday, August 19, 2010 “Phenomenally accurate forecasts”
Long-term yields could be bottoming here if a T-Bond futures target that we’d flagged the other day holds up. The target, a Hidden Pivot resistance at exactly 134^09 (basis the September contract), lies just two ticks above yesterday’s high, 134^07, and corresponds to a yield of about 3.64% on the 30-Year Bond. However, since we cannot rule out the possibility that bond prices will continue to rise, driving yields even lower, we will continue to monitor the target closely. There are several possibilities going forward. One is that the target gets decisively penetrated within the next few days. If that were to occur we would regard it as a clear sign that the extremely powerful rally begun in April is likely to continue at its recent pace. T-Bond quotes have been rising steeply since spring as yields have fallen from around 4.86%, but it’s conceivable that yields could drop to as low as 3% if the rally continues until November. Another possibility is that the 134^09 Hidden Pivot contains the rally for the time being. That would suggest that yields will either remain steady or move higher.
Usually we can discern a reason for trend changes in the trading vehicles we track and forecast. But in the case of the long bond, the logic of a downturn in prices can be very elusive, if not to say arcane. Explaining why bond prices have risen in recent months, on the other hand, is not rocket science. The conventional explanation is that investors around the world have bought U.S bonds because they are still the safest investment around. If there is any borrower that can still be reckoned as too big to fail, the U.S. Government is it. (For the record, we see the U.S. as a bankruptcy-in-progress and cannot conceive of any other outcome.) A Lush Mirage Additional “support” for Treasurys is coming from the government itself, since the U.S. is now parking the proceeds from maturing mortgage paper in longer-dated T-Bonds. We put quotes around the word “support” because it is beyond stupid to think that a bankrupt government’s purchases of its own debt supports much of anything except a mirage. Even so, we accept that the institutional lemmings will continue for yet a while longer to gorge themselves on the coconuts, cool water, dates, figs and olives produced by their lush mirage. As to why bond yields would be headed higher, we can only speculate that perhaps the debt paper issued by newly-austere Europe will gain favor for a while.
*** Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2010, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Thursday, 19 August 2010 | Digg This Article | Source: GoldSeek.com
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