The chart on the left hand side is based on the yield of the 30 year Treasury. We are now counting a 12 month and are far below the Bollingerbands. We will see a mid term correction soon (within 2 months) which should last for at least 2 months but an extended version is possible. Interesting is though that from a price pattern perspective we broke out of a triangle formation between 4.10 and 5.50 , hence a strong indication of a move with 140 BP beneath 4.10 is indicated towards 2.70. It will be important to see if any counter move will be limited to 4.10 since a monthly 13 is a powerful turning point but that is not casted in stone. We have a bit conflicting messages here it seems but on the other hand as this big down leg in stocks comes to an end and a decisive rally should follow - I still expect a big second down leg in stocks to follow into 2010 with substantially new lows and that might trigger another save heaven spree. On the other hand at some point in 2009 when it becomes clear that all those bailout and aid programs do not work respectively much more money has to be injected by the governments Bond markets should get into trouble. That is the common sense behind it but as we entered a highly irrational cycle anything is possible.
Friday, November 21, 2008
The Bond factor - hinting to a low in stocks soon
The chart on the left hand side is based on the yield of the 30 year Treasury. We are now counting a 12 month and are far below the Bollingerbands. We will see a mid term correction soon (within 2 months) which should last for at least 2 months but an extended version is possible. Interesting is though that from a price pattern perspective we broke out of a triangle formation between 4.10 and 5.50 , hence a strong indication of a move with 140 BP beneath 4.10 is indicated towards 2.70. It will be important to see if any counter move will be limited to 4.10 since a monthly 13 is a powerful turning point but that is not casted in stone. We have a bit conflicting messages here it seems but on the other hand as this big down leg in stocks comes to an end and a decisive rally should follow - I still expect a big second down leg in stocks to follow into 2010 with substantially new lows and that might trigger another save heaven spree. On the other hand at some point in 2009 when it becomes clear that all those bailout and aid programs do not work respectively much more money has to be injected by the governments Bond markets should get into trouble. That is the common sense behind it but as we entered a highly irrational cycle anything is possible.
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