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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 689.58-0.3%Jan 7 4:00 PM EST
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To: Michael Watkins who wrote (18362)6/23/1999 9:42:00 PM
From: pater tenebrarum  Read Replies (2) of 99985
 
Michael, the dynamics governing the bond market are more than just the expectations w. regard to the next Fed move imo. government profligacy(or lack thereof<g>), foreign money(esp. japanese) and the general level of credit demand all play a role; not to forget the price of crude and inflation expectations. but of course you can put the causes and effects in any order you please (except that the price of crude is independent of Fed action). in the end the charts are telling the story; according to the charts a bear market in bonds is still in effect. but it is also oversold, at an important support level and subject to a healthy dose of bearish sentiment. therefore it should bounce, even on two 1/4 point hikes. the hikes imply an economic slowdown down the road and that usually results in a flattening of the yield curve, with the long end favored over the short end. as mentioned previously though, big hedge fund positions await their unwinding at some point and massive corporate supply is also weighing on the market. so it is not easy to make a case for a strong rebound; otoh the may CPI and the last jobs report indicated inflationary pressures are still tame, and a rate hike will be greeted by the market as insurance they will stay that way, which could finally kick-start a rally of sorts.

regards,

hb
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