Bonds Low in Range Attracting Hard Cash
Bonds Have reached a low in the annual range today.
This has made the bonds more attractive to traders in Bonds and Currency.
This low in bonds has caused a major correction in Gold, the Euro and the Yen.
Oil and the S&P have maintained highs.
We have seen that the S&P as of lately is dependent on cash coming from the sale of bonds (low bonds) to maintain new highs. We have also seen that record oil prices have been supporting DOW and S&P companies involved in the Oil business either directly or through corporate finance.
What is unique about today is that the Euro and the Yen broke a trading range strong against the dollar and fell into a weak price range. Gold although at a new high when it went bear has reached some support going back over the last several weeks.
I would expect the gold to recover first from this bear run on the favored yen,eur,and gold.
I would expect that none of these favored assets will recover if the US Bond price stays low. The selling of bonds may be the market expression of the Federal Reserve bailout process. There was an announcement today that the Federal Reserve is limited in the degree to which it can bail out the US market. This announcement was made contemporaneously with what appears to be an attempt by institutions to sell bonds and maintain the US markets.
I believe the money coming from Gold, Japan and Europe has come to by the bonds at new lows, and that the money supporting the Market and Oil are coming from the sale of bonds.
If this is the case, if the bonds drop sharply again, it is likely the market will have an up day.I believe that this is an attempt by the Fed to break the trading range high that has been established in US equities over the last 70 days.
I don’t know how or when the fed will be exhausted but it will be exhausted.
In recent bond market crashes interest rates have skyrocketed while the risk of the nations bonds has increases. The bond markets crash and the currency loses its value as the currency is exchanged away from the sovereignty. In our case we have seen no interest rate hike because the nation is not in question. The market has taken the hits, and the buying of bonds by the population and the selling of bonds by the institutions has been the source of the capital to maintain the trading range of the last two months.
Bonds are now at a range low. This makes the bonds attractive to those who are not involved in bonds on a day to day basis. These are large banks and international movers, who wait for months to see prices that meet their criterion.
The Bond prices may continue to drop as the Fed sells them off to produce cash as part of its market stabilizing operations. This will temporarily keep the eur, yen and gold at bay while things are worked out internally. On the day following a run up in the bond prices the EUR JPY GOLD long term run will run on course to express our hyperinflation situation.
Continued bad economic indicators such as unemployment consumer confidence and foreclosures will virtually guarantee the hyperinflation scenario.
As for today I expect Oil and S&P may run up for a day while the EUR JPY will hold or take another hit. Gold will most likely recover because it is at a range low, although this pattern indicates it may also be subject to profit taking specifically for the purpose of buying low bonds. Gold today is a good case of technical versus tactical analysis coming into conflict. If I knew more about Gold in relationship to Bonds historically I could make a better statement about the next move in the Gold market and I might be able to resolve the technical versus tactical conflict.
Gary states that the interest rate on the two year note is having a major hike this month. This has caused a pullback in gold.
This compounds the weight of an analysis that Gold traders are moving into bonds. We now know that they are not only moving in to take a low price on 30 year but also to take advantage of a 2 year interest rate hike.
My wife states that the run on the EUR as she heard it from the news, was as follows.
“The dollars crashed two cents today while the euro stayed high.”
What is amazing about this sentence is that it can only be propaganda.
The value of a currency is always measured in relationship to another currency. Exchange rates are the values of currencies. So when the dollars is said to drop we must ask against what? When the euro stays high we must ask against what?
In my opinion there are several things going on here. The euro is a very highly politicized and popularized foreign currency. Due to all of the tax advantages and educational advantages more business will move to Europe. Money doesn’t always follow the business. The German Central Bank has a credit analyst who I had the pleasure of talking to one day. He showed me a study in United States debts in which he showed how safe Credit Cards and Mortgages are in the United States.
The joke is on him.