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Price support and yield resistance has been in place for months and years in the above chart. So far it has paid to buy bonds on price support and yield resistance. This strategy is being put to the test right now, in a big way.
Game plan…If yields break out and prices break support, “scoring on defense” in bonds will need to be the play. At this time the yield breakout HAS NOT taken place, yet if it does, it will be a break of a 15-year channel!!!
Excellent comments guys. Some of the reader comments here are as good as kimble’s observations. I wish there was a way to keep track of comments to certain threads like “bonds”, which i consider important in implications to other markets.
As of this week’s close, the support kimble has on this chart has been broken, but barely (i am assuming 46-47 is a pink area). Weekly Close was back into the pink area near 47. This in combination with the USD observations by kimble points to some interesting times ahead.
Hi Chris,
Where would you put the break-out line on TLT? Unfortunately I own it!
If this one breaks look at what that will say about the level of confidence in our government! That will mean large investors will have started to throw in the towel on US government debt. That capital will go somewhere and it won’t be to cash. If government bonds go, then we may be heading up huge in the metals and stocks and grains. Look out!
Chris, would you consider an inverse correlation between bond and stock prices here? That is, if the SP clearly breaks above the 1300 resistance bonds are likely to break 15 year support, and inversely, if stocks tank from here bonds could rally after there bullish falling wedge?
Chris – As of this morning I have the rate on the 30 yr long bond being 14.5% away from its 10 month moving average. Since the mid 1970s I have that being exceeded only two other times in history – once in 1980 when yields went parabolic and were as high as 23% away from their 10 month MA and before Volcker tightened and once in Sept. 87 when they were 17% away from their 10 month MA and in front of the equity crash in Oct. Just saying, history strongly suggests here that rates have come too far way too fast…