Here's something very important i just recieved from Dorsey Wright..
it adds another negative to the whole picture...
This morning we need to bring to your attention some important information on the bond front. The Dow Jones 20 Bond Average (DJBB), our main bond indicator, gave a high pole warning sell signal at 96. The DJBB had been on a buy signal since June when it gave a low pole warning at 94.6. This high pole warning for the DJBB suggests that we will now see this index break a double bottom at 95. Since 1992, there have been 13 signals in the DJBB and of those 13 signals, 11 have resulted in profitable trades. With those kinds of odds, this high pole warning sell signal in the DJBB is something that raises at least a yellow flag to you.
In addition, we see the December T-Bond contract has just broken a triple bottom and then violated its bullish support line at 97.50. Yesterday T-Bonds reversed down to make another lower top and set up a potential bearish catapult formation at 97.25. The 30 Year Yield Index (TYX) formed great support at 56.5 having held there four times and then a triple top was broken at 57.75. The TYX has subsequently moved through the bearish resistance line to change the trend to positive. Remember that the TYX measures the yield itself - as yields rise so does the TYX.
Given the above information outlined on the DJBB, the TYX, and the December T-Bond contract, we would not initiate new bond positions here and those long should consider locking in profits here or at least lightening up.
We do want to note a couple of things with respect to the financial related sectors and vehicles. December T-Notes are still on a buy signal on their chart and have not broken down yet. While some sectors, like Utilities, are at overbought levels on their sector bullish percent charts, the financial sectors across the board (Banks, Finance, Savings & Loan, Insurance, Utilities, and Wall Street) are all still showing good relative strength readings versus the overall market. However, with the DJBB giving a sell signal, it would be prudent to review your equity holdings in the financial area. One thing that might be applicable here is if you are up 30% or more, consider trimming a partial position. If the stock still looks fine on a technical basis and the relative strength is strong, just confirm where you should place your stop loss point and then stick to it.
regards OJ |
