What Happened To The Bond Rally? Asks Market Timer Frank Kollar
December 14, 2007 (FinancialWire) (By Frank Kollar)
On Tuesday, with the stock market rallying and bond markets easing, Fed Chairman Bernanke pulled the plug on the works by issuing a statement that contained no direction for future weeks. Give us good news. Give us bad news. But give us news!
The disappointing ¼ point cuts in fed funds and discount rate, plus lack of guidance in the released statement, caused the stock market to fall off a cliff and take a huge triple-digit Dow decline. The opposite happened in the bond market, which roared to life and reversed what at what appeared to be a correction bottom.
Since Tuesday, the stock market has attempted to recover its losses, though somewhat without obvious purpose. But the bond market, after that one day rally, immediately reversed and today managed to move lower than the lows reached just before the Fed’s Tuesday statement.
Bond traders ignored Bernanke’s lack of direction, and are betting on higher rates and possible inflation ahead.
A good trading vehicle for bonds is the ETF iShares Lehman 20yr (NYSE: TLT). TLT closed Thursday at $91.03. A close below 91.69 in coming days would confirm the downtrend is still in place and has considerably further to go.
The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy holds a position in Ishares Lehman 20 Yr.
Kollar’s research has shown that the financial markets are in tradable trends approximately 80 percent of the time. FibTimer strategies define trends and trade them in both advancing and declining markets. Caring nothing about what newscasters say or what the latest economic indicator predicts, trends are where the profits are, and that is where FibTimer is.
Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.
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