Waiting for the big Kahuna Message Board

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Strategies & Market Trends : Waiting for the big Kahuna

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To: GROUND ZERO™ who wrote (41170)	6/29/1999 6:27:00 PM
From: pater tenebrarum	Read Replies (1) of 94695

GZ, i happen to agree with you on the T-bond. there are several reasons for this. one is that bullish sentiment on the bond was at 22% last week(market vane) and that is a level that is historically associated with bottoms. furthermore there are 89,000 puts in open interest at the 114 september t-bond futures strike, which lends strong support to the contract at that level. fundamentally a pre-emptive strike against inflation by the Fed will be welcomed by the bond market and lead to a flattening of the yield curve, with money shifting from the shorter to the longer end. this is also the strongest argument for a rally in the stock market i can find, as stocks have tended to remain in a trading range when yields go up and rise when they come down. BUT: optimism in the stock market is simply too high. if we had a strong sell-off, say a correction back to the 200-dma's, the chance for a really strong and persistent rally would improve substantially, as this surfeit of bullish sentiment would be wiped out. regards, hb

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