A question from a friend about bonds is below, with my answer, and related info:
Q: “Looking like an upthrust on TLT, thinking about buying puts if it rolls over. Some pretty big red volume bars. Wondering what you and Scott thought, since the FED has recently become more dovish perhaps it has more legs to the upside.”
A: OK. A) I’m not trading bonds, ONLY STOCKS, B) I bought stock index puts this week, covered some into close FRIDAY, I’m writing a post about stock market, and C) I do not think it’s an upthrust in bonds, it’s a bko. I warned people in the Fall that the Fed would pause, the economy was weakening, we are headed into a recession, stay away from shorting bonds, let them rally. Also, what have I been constantly telling you now for weeks – the IWM lagging is a very big problem, but that would not stop the SPY and QQQ from going to new highs, exactly like what happened in Aug/Sept, and 20 minutes after the Fed meeting I sent you that message –
“And now of course, the market experts are bullish because the Fed is holding off on raising rates, so why has the IWM lagged for 23 days, is lagging while spy/qqq went above res, is below supp, was setting new lows today. So now the next thing will be, the market will say, we need to start worrying about the economy.”
From 6 months ago:
“Also, the strife discontent protesting violence in the US, yes around the world, but to the US, this plays exactly into the situation with bonds. Meshes beautifully. And it will continue to grow. You think Trump came out of the blue? Cycles elect the person in the new environment. It could have been any “trump”. So we have all the weird idiots constantly giving him crap. They have no clue as to why he is the “chosen one’. And this will only get worse, more socialism calls, more anti-immigrant feelings, more division – people want “security”, Trump understands that, and is “exploiting” it. So he will continue to pile on the debt, helped now by the new Congress, that is all they will be able to agree on – more and more spending.”
The bond market is in a massive bear market, but similar to my extreme bearishness – LONG TERM – on bonds, I wrote a detailed article in Dec 2016 here, about why I believed, and bought bonds in Dec 2016, that there would be a huge rally in bond prices – but it is a bear market rally:
Dec 2016:
“So while the short term picture for yields is brighter with the hysterical bond crash talk and the technical situation, the much bigger picture for bonds is far from rosy. As can be seen from the chart, the 2.4%-2.5% area for the ten year yield is a solid resistance area. I do expect it to be broken eventually, but the drop in yields from here could be surprising. The next big area is around 3.05%, which will likely be another short term trade area to take the other side. But this is what we are now facing in the world as we enter 2017. Really the beginning stages of a very long term bear market in global bonds.“
