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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 683.38+0.1%Nov 12 4:00 PM EST
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To: re3 who wrote (26221)9/19/1999 6:16:00 PM
From: pater tenebrarum  Read Replies (2) of 99985
 
Ike, this is a difficult question...chart-wise, the rates have moved up in a big rising wedge as LG has remarked, and one would expect them to retrace this move at some point. however, fundamentally speaking, i believe that the economy is close to overheating and the inflationary pressures in the pipeline are clearly building up. so it's quite possible that rates will first rise one more time within their channel and provoke a bigger correction in the stock market. at that point treasuries can probably be bought hand over fist. there are two forces at work currently, a cyclical inflationary push on the one hand, and a secular deflationary trend on the other. in the ST, the cyclical forces should prevail for a while...LT, the secular trend is more important. global overcapacities and the debt mountain cannot be wished away. the crisis they have brought on beginning with the devaluation of the Thai bath in '97 has not really gone away yet - it has merely shifted it's focus. right now an economic crisis is raging in most of LatAm and i suppose that this is supporting treasuries somewhat. hopefully we are not in for wholesale dumping of paper assets at some point - it's very unlikely, but not impossible. the more likely scenario is however that a break in stock prices will lead to a shift into bonds, similar to previous occasions. depending on how the Fed reacts to that one will have to assess how durable such a move into bonds will be.

hb
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