Gary,
Her's some #s to plug into your analyses...FWIW...they are from PEI.
For most technicians it will be of more than passing interest to see
what happens here as bonds test former trendline support (now
resistance). The High Tick today for bonds was 113-30. Unemployment on
Friday or Jobless claims tomorrow may well tell the story.
Often when a market breaks below an important trendline support, it will
come back to retest it one more time, before resuming its downward
course. Therefore, failure here at 113-30 could be devastating to
bonds. Confirmation of a move towards 103-15 (dec) still demands a
monthly close below 111-26.
Alternatively, if bonds break back solidly above the trendline with a
close above 11524--11615 system resistance, they will be on firmer
ground. This would suggest a continuation of the rally.
What might the fundamentals be to suggest either course? Greenspan
has pointed out, higher rates may have already dampened demand in the
housing market. Some evidence of this already exists. A sharp
slow-down in housing couild slow down this turbo-charged economy. If
Greenspan is right about the increased value of housing having a
substantial effect on consumer spending patterns, then presumably a
sharp downturn in the real estate market would cause the economy to slow
down, without much need to raise rates going into next year. This
slowdown in the economy could easily be the spark a substantial rally in
bonds.
On the other hand, it is still quite possible that commodities could
pose a risk for bonds. Many analysts are already forecasting a move to
$30/bbl for OIL this Winter. This move may be already partially
discounted by bonds, but I'm not so sure. Also, a move beyond $30 this
winter cannot be totally ruled out. Nymex Crude just elected 4 monthly
bullish reversals. Weekly resistance now stands at 23.60 24.95 26.05
26.90 28.10 32.35 and 34.25. A move towards 28.10---32.35 area seems
entirely reasonable. Monthly resistance lies at: 25.70 26.10 26.74
35.85 40.10 and 41.15. It is possible that a monthly close above
26.74 will cause a immediate spike to 35.85. There has to be level
beyond which traders get concerned about commoditiy inflation. My guess
is that if Nymex Crude moves much higher than $30, then bonds are in
trouble. Shy of $30, traders will continue to discount it as just
another winter rally that will give way to plunging oil prices by
Feb/March. Weekly Support for Nymex Crude (nearest futures) begins at
21.20 followed by 19.15. Only a weekly close below 19.15 would suggest
the beginning of a serious downtrend for oil.
GOLD: It is not fashionable to see a link between rising gold prices
and risk to bonds. Its okay for bonds to rally while gold is plunging,
but to assert that it can also work the other way around is
musty-cobwebbed thinking at best, according to most analysts. To a
certain extent I would agree. If gold is the only commodity to rally
then it is unlikely to have much effect on bonds. However, if gold is
just one of many commodities that begin to surge, bonds should feel the
effect. Gold appears to have found support at the 290 area and may be
building a base for the next leg higher. Only a weekly close below
277.1 would damage the uptrend and suggest a test of 252.8. To confirm
a move towards $398 yearly resistance, look for a monthly close above
334.7.
CRB just recently elected two monthly bullish reversals at 204 and 205
level and very nearly elected the critical monthly bullish reversal at
206.73---which is last resistance before a gap to 229.00 area. After
selling off for 12 trading days, the CRB may now be ready to reassert
itself. Watch for a monthly close at the end of November above 206.73
to confirm a move to 229 area or higher. |
