April 2, 2019
There is certainly a lot I don’t know…but one thing I know about the Bond market is that THE two biggest influences on it are Stocks and Crude Oil…
Right now, Stocks are headed towards new highs with VERY little if any enthusiasm about the FACT we are in a bull market…Do you really hear ANY strong projections about where we might be headed for the rest of the year? Or is most of what you hear just more of the type of doubt I keep posting as bearish headlines in my newsletters…? Negative headlines that appear, in one form after another, day after day after day?
And Crude? Hear anything really bullish there? As it continues its march higher? One of those other things I “know” is that Crude usually doesn’t stop in whatever direction it is heading UNTIL you at least get some, “Holy Cow! Crude just moved $8 in the last 3 days,” sort of headlines. And that is NOT what we have in the media now…as CRUDE CONTINUES TO MAKE NEW HIGHS FOR THE YEAR.
The point is, both of these sectors ARE on their way higher…and I think are on the verge of maybe becoming RUNAWAY markets on the upside…BUT, simply because maybe 2% of analysts actually believe that Stocks and Crude ARE heading higher, their analytic counterparts in interest rates are also mindlessly fearing a “world slowdown”, or “the coming recession”, and as such, are now FULLY committed to the bullish side of bonds…and as a consequence, their classic “late to the party” buying has kept Treasuries elevated…when they SHOULD already be on their way down.
I THINK BONDS SHOULD ALREADY BE 10 POINTS LOWER…
AND I THEREFORE STRONGLY BELIEVE THAT ANY DOWNSIDE ACTION…SUCH AS WE HAVE SEEN TO START THIS WEEK…CAN EASILY BE THE BEGINNING OF A VERY SHARP “CATCH UP WITH REALITY” SELL OFF IN TREASURIES…AND THEREFORE CONTINUE TO RECOMMEND SHORTING FUTURES AND BUYING PUTS…RIGHT HERE…RIGHT NOW.
As can be seen on this chart, Crude and Stocks DO tend to move opposite the Bond market…And I see last week’s 3-4 point upside surge in the Bonds as the CLASSIC last gasp rally that I have documented (more than once) on 80% of the Treasury market tops, or downside reversals, during the past 40 years…And DO think that the weakness we have seen to start this week IS the beginning of a big, fast, potentially non-stop sell off.
Though I have NOT been perfect, many of you know me for having correctly predicted a multitude of big Bond market moves for decades…And as it IS the nature of the beast, I will say that those calls have ALL been in atmospheres identical to what I believe we have now…wherein, the ENTIRE Wall Street world is saying, “Buy!”, and I am going HARD in the opposite direction…Beyond that, I will say that with so many people having seen me do this SO many times since 1982 (and again, I am not perfect, and NOT patting myself on the back), I think it is “telling” that virtually NO ONE I personally know agrees with this opinion…or at any rate, agrees with me enough to put money on it…And believe me, I’m not whining…I also recognize that, especially in the interest rate market…where EVERYBODY has some sort of opinion…having nobody agree with me IS just one more reason for me to believe that I am right.
I MIGHT BE DEAD WRONG BUT I SEE THIS AS A GIANT…AND IMMEDIATE…TRADE. I MEAN IT WHEN I WRITE THAT 10 POINTS IS NOT A BIG MOVE IN BONDS…ESPECIALLY WHEN MY REAL TARGET IS FAR LOWER THAN THE 138 I NOTED ABOVE.
Give me a call. REALLY guys…If you just don’t agree with me, that’s one thing…But if you think I am making sense, don’t just sit there…
All option prices in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Treasury Bonds