The Time to Short Bonds?

By Fil Zucchi  JUN 04, 2009 12:10 PM

Wait for either higher prices or the unraveling of the dollar - whichever comes first.


I've been very vocal in my belief that we've entered a secular bear market for bonds, and you can paint me squarely in Julian Robertson's camp. The question, of course, is always one of timing. The late 2008 move up in the long-bond price was staggering in size and speed, and the drop back since the peak has been almost as sharp - particularly if we consider that the Fed has been bending over backwards to keep rates low.

The point is that using the "continuous 30-year Treasury contract" (US1) with DeMark now shows a Perfected 9 Buy Setup on the weekly chart - and, if the price ticks below 115-23 in the next couple of days, it will register both a Perfected 9 Buy Setup and a completed Countdown 13 Buy Setup on the daily chart. This is all happening very close to TDST support, as well as an obvious trendline-support level.

Just as the making of the high temporarily ignored a Countdown Sell Setup, it wouldn't surprise me if bonds do continue down to the TDST line. But for my money, I see more risk of a retracement to the 125-130 level than of a straight knifing-through support. If the latter were to happen, it probably would happen in the context of a complete currency debacle - something that's coming soon, but probably not quite yet.

I'm not inclined to buy bonds here, but I have no desire to be short until we either get higher prices or something happens to unravel the dollar.
No positions in stocks mentioned.

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