Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Are US Treasury Bonds About to Rally or Implode? Part2

Interest-Rates / US Bonds Feb 17, 2010 - 09:14 PM GMT

By: Graham_Summers


Best Financial Markets Analysis ArticleBack in October I wrote a piece, Are US Treasuries About to Rally or Implode?  At that time, I noted that the chart for long-term US debt was forming what could have either been a challenge to long-term support, or a potential head and shoulders pattern.

The main idea was that the market was about to tell us whether or not investors considered US Treasuries a safe-haven anymore. If they did, long-term debt would rally. If they didn’t the potential head and shoulders pattern would be confirmed by a break below the “neckline” which would trigger a major sell-off.

Well, we DID break support. Indeed, in late December it even looked like “neckline” for Treasuries had been violated. But then stocks took a nose-dive and investors plunged back into US debt as a safe haven.

Put another way, Treasuries did a head-fake. They lured the bears into believing that the neckline was violated and that US debt was about to collapse… but then quickly regained their support line, shredding the bears and re-asserting that despite our reckless monetary policy, investors still consider US debt to be a safe haven (if for no other reason than we have a money press and can simply print cash to insure the return “of” capital rather than a return “on capital; yes, this matters during a Crisis as 2008 proved).

So here we are in February and the exact same set-up has occurred. Once again Treasuries are bumping up against long-term support:

But they could be just as easily primed to break below their neckline:

Which will it be?

I can’t tell you (no one can). But given that demand for long-term US debt has fallen off a cliff (not to mention that China has actually open discussed potentially selling Treasuries) the potential for a “neckline” violation followed by a serious sell off (to 110 or lower) is higher than it was back in October.

However, we could just as easily see stocks take a nosedive which could precipitate a flight to safety that could push Treasuries back up to 122 again. Really the only thing to do here is wait and let the market dictate to us.

As I stated last month, Bonds, not Stocks will be the BIG Story of 2010. We’ve already seen the beginnings of a Crisis in the Euro. A Crisis in the Dollar is not out of the question. For those of you who take an abstract approach to your investment philosophies, the trend-line for long-term US bonds can be seen as representing the line of “confidence” in the US. If bonds fall below it, confidence has been lost and we may be witnessing a full-fledged flight from US debt (what the recent long-term bond auction seems to be warning).

Conversely, if bonds stay above this level, then we know investors are still willing to put their money with Uncle Sam if for no other reason than he has a printing press handy.

Forget Greece, forget the Euro, forget stocks. Keep your eyes on long-term US debt. It’s a proverbial “canary in a coal mine” for virtually every other investment class in the US. If long-term debt collapses, the Dollar is in trouble and stocks might temporarily rally (the ensuing spike in interest rates would quickly crush this though). However, if long-term debt rallies, the Dollar should jump and stocks/ commodities should take a serious hit.

In tomorrow’s essay I’ll detail where Gold fits into all of this. Gold of course is a commodity, but ultimately it’s a currency. The question is whether investors are really beginning to see this (a flight from paper money is underway) or if they still see Gold as some kind of anti-Dollar hedge and nothing else.

Good Investing!

Graham Summers

PS. I’ve put together a FREE Special Report detailing THREE investments that will explode when stocks start to collapse again. I call it Financial Crisis “Round Two” Survival Kit. These investments will not only help to protect your portfolio from the coming carnage, they’ll can also show you enormous profits.

Swing by to pick up a FREE copy today!

Graham Summers: Graham is Senior Market Strategist at OmniSans Research. He is co-editor of Gain, Pains, and Capital, OmniSans Research’s FREE daily e-letter covering the equity, commodity, currency, and real estate markets. 

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

    © 2010 Copyright Graham Summers - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

    Graham Summers Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules