U.S. T-Bonds: Focused Bear Opportunity Produced 20% Annualized Gain
Eric De Groot | Jan 01, 2017 12:37AM ET
Those that view the message of the market on a daily basis are likely confused by trading noise. While trading noise contributes to the long-term trends, it does not define them. Human behavior tries to explain trading noise as a meaningful trend. This confuses the majority which, in turn, contributes to their role as bagholders of trend transitions.
While coordinated 'stimulus' supports a countertrend rally of commodities foreshadowed by negative concentration prefer government bonds, notes, and bills at least in the initial stages of the next panic.
What Mellow omitted is that investors prefer the public sector (bonds) when confidence in the private sector (stocks) is failing. Investors preferred bonds in 1929 because confidence in the private sector was failing. While gentlemen could prefer bonds in the initial stages of the next panic, they'll like turn on them as confidence in the public sector falters from an already shaken position. This will burn a majority populated by central bankers and followers of today's bullish headline hype rather quickly.
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T-Bonds focused bear opportunity has produced 20% annualized gain (excluding dividends) since the second week of November (see TLT Matrix). This opp recorded an impressive 67% and 64% annualized gain in the second and first week of November and December, respectively. Disciplined bears that withdrew initial investments by the first week of December are letting their profits run while watching DI and TIME.
Bonds DI has risen to a Q2 74%. This accumulation of energy necessary favors at least a counter-trend rally (short-covering) over the short-term. The bears that did not withdraw their initial investment or more in late November or early December could easily be recognized as pigs in the coming weeks.
Smart money, a small minority listening to the message of the market, recognized the decay of TIME as BuST rises above 0 and approaches 2. BrST = -0.4 defines a trend approaching its mid point.
TLT Matrix
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The weekly close below support at 115.05 supports the down impulse, while a close above resistance from 121.25 could reverse it. A reversal favors testing of higher resistance.
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