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What Does Wave Theory Say About U.S. Treasuries?

Interest-Rates / US Bonds Nov 08, 2011 - 02:02 AM GMT

By: Glenn_Neely

Interest-Rates

This article is Part 3 of a 3-part interview series with Glenn Neely, founder and president of NEoWave Institute.  In these 3 interviews, conducted by blogger Bud Fox, Glenn Neely looks ahead at 3 specific trading markets (Euro, Gold, and Treasuries) through the lens of Wave structure and explores what Wave theory tells us about the next 5-10 years.


Bud:    This is Bud Fox, author of www.GreedAndMoney.com, a blog that specializes in US equity index trading.  In our last interview, “Gold Futures Through a NEoWave Lens,” we discussed Gold and where you see it going in the short and long-term Wave structure perspective.  Our first interview, of course, covered the euro.  

The last question I have is another hot topic: T-Notes. The Treasury’s 10-year note actually hit 1.67% the week of September 18, which is the lowest yield in history. Investors who buy Treasuries now will have very little return. Anyone who purchased previously continues to see values go up.

My question is, do you expect Treasuries to crash and is this another bubble, or do you think Treasuries are in a bull market? On the other hand, how low can yields go? And how high does it need to go to generate a positive yield?

Glenn: The current, new uptrend began in July when yields were at 3% on the 10-year yield. In a matter of weeks yields reached 1.7%! Based on wave structure, Notes should hold up for an extended period. It took about two years for Waves-A & B to form, which means Wave C should unfold for about year.

This implies Notes will trend sideways-or-up for a year before reaching a potentially important top. A year or two from now, a major change in interest rates becomes possible. But, as long as the majority is concerned about the government “printing money” and propping up businesses, the uptrend in Notes should continue.

Despite the level of “spending and printing” the U.S. government has been involved in the last few years, the behavior of Notes indicates the international forces of deflation are even greater, which is why they are trending higher.

Bud:    In essence, you think that, at least for now, this is a legitimate bull market.

Glenn:   Yes.

Bud:    Ultimately, we will come down, but for now it’s not a bubble, even though everybody says it’s a bubble?

Glenn:   For at least a year Notes should move up or trend sideways (which means rates will trend sideways or lower). I wouldn’t fight this uptrend in Notes, but I wouldn’t necessarily buy Notes at this time either. But, if you are already in, being long notes and bonds is probably safe for the next year. You’re not going to get much interest out of them, but there is some potential for appreciation.

Bud:    Glenn, I really appreciate your time. That concludes my questions.

Glenn:   Thank you, Bud. Those were interesting questions and I enjoyed talking with you.

To view the first two posts in this 3-part interview series, please see What Do Wave Charts Say About the Euro? and Gold Futures Through a NEoWave Lens.

Founder of NEoWave Institute, Glenn Neely is internationally regarded as the premier Wave analyst. He has devoted more than 25 years to mastering Wave theory, stock market predictions, and successful trading. In 1990, Neely published his advanced Wave analysis process in his classic book, Mastering Elliott Wave. In the following decades, Neely continued to evolve Wave theory to make it objective, practical, and consistently accurate. This evolution produced NEoWave technology – a precise, step-by-step assessment of market structure, which results in low-risk, high-profit trading and investing. See for yourself: Subscribe to NEoWave’s 2-week Trial Service. Learn more Glenn Neely and NEoWave Trading and Forecasting services at www.NEoWave.com.

© 2010 Copyright  Glenn Neely - 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.


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