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 -Monday, September 06, 2010
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| Weekly Economic Summary |
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| Brian Heyliger, Professional Trader/Instructor |
 A theme you’ve noticed from me in the passing weeks is this: I’m bearish on bonds! Specifically the 30-year U.S. Government “long bond,” (ZB 12-10). Our day finally came.I won’t bore you with the horrible fundamental situation. We all know unemployment is over 9% (so they say), deficits are exceeding 90% of GDP, or the fact that the U.S. Government is using it’s “credit card” like a punch drunk teenager with no credit limit. I’m sure you’ve heard that part already. The fact is, U.S. Treasuries were the most overbought they’ve been all year. And as a result, reality is setting in, as the bulls are surrendering this market to the bears. If you’ve been a bear with me over the past week and a half, you’re sitting pretty well about now. If you got on the wrong side of the market you have a substantial loss now. The 30-year long bond has come down more than 4-points from its high of 137’00, breaking a strong uptrend which began April 2010. So the big question is where do we go from here? I believe that we could see at least a 10-point decline from the top of 137’00, but it will not come in one shot. The next decline will come after a 2-3 point counter trend rally takes place - this is how the bonds trade. In typical stair-stepping fashion, the bonds will fall a few points, then experience a smaller counter-trend rally before the next, larger decline begins. These rallies will be good selling opportunities in my opinion. We all know the old adage “the trend is your friend,” and up until last week, it was a friend to the bulls. It is my opinion that today the bulls and bonds had a fall out, and the trend has shifted in favor of the bears. “Selling the rallies” is the order of the days ahead, just use caution as managing risk is this paramount to trading the bonds successfully. Trading futures has a substantial risk of loss. Good Trading. Click here to return to the Weekly Newsletter & Commentary |
