11-16-2018, 07:57 AM
Sometimes it pays to ignore technical signals, but not very often. A quick look tonight (Friday) at five year one-week bar charts and MACDs tells a really ugly tale and points to a high probability that bond / fixed income prices are headed much lower and rates may increase well beyond current expectations. Pull up the charts and consider:
1. IEF (7-10yr) and TLT (long bond) ETF prices have clearly broken below the necklines of huge multi-year head and shoulders formations, and MACD are on strong sell signals. The scope of the downtrade associated with the H&S breakdown point to, for example, a 4+% 10yr Treasury.
2. Highly leveraged MREITS NLY and AGNC also have broken H&S and MACD sells.
3. The following asset-type ETFs ALSO have broken (if slightly less perfectly formed) H&S and MACD sells: MUB (munis), LQD (investment grade), and PFF (preferred stocks).
4. And although it is a less well-formed H&S, HYG (junk) is ALSO bustola and on an MACD sell.
These technical indicators/signals project such dire outcomes that it is frankly hard to believe the shoud NOT be ignored this time, and they will quickly reverse --- and the projected outcomes diverge really wildly from the current "benign slowly-rising rate" dominant narrative. FWIW, although I'm not a slave to technicals, I plan to remain in 75-PLUS% cash until these technicals either soon clear and reverse or (unhappily) complete.
Thoughts? Corrections? Amplifications?
1. IEF (7-10yr) and TLT (long bond) ETF prices have clearly broken below the necklines of huge multi-year head and shoulders formations, and MACD are on strong sell signals. The scope of the downtrade associated with the H&S breakdown point to, for example, a 4+% 10yr Treasury.
2. Highly leveraged MREITS NLY and AGNC also have broken H&S and MACD sells.
3. The following asset-type ETFs ALSO have broken (if slightly less perfectly formed) H&S and MACD sells: MUB (munis), LQD (investment grade), and PFF (preferred stocks).
4. And although it is a less well-formed H&S, HYG (junk) is ALSO bustola and on an MACD sell.
These technical indicators/signals project such dire outcomes that it is frankly hard to believe the shoud NOT be ignored this time, and they will quickly reverse --- and the projected outcomes diverge really wildly from the current "benign slowly-rising rate" dominant narrative. FWIW, although I'm not a slave to technicals, I plan to remain in 75-PLUS% cash until these technicals either soon clear and reverse or (unhappily) complete.
Thoughts? Corrections? Amplifications?