IQ,
You mentioned being pleased that the bond yield curve is
now moving away from a "inverted" curve to one with a
100 to 200 basis point spread.. On a short term basis
everyone seems to be overjoyed with this scenario.. What
I find interesting; up until July 31 of this year
(long bond at 121) the market was overjoyed with lower
yields. At that juncture (from 121, long bond)the equity market
sold off until the long bond hit a hi of around 135 on
about Oct. 8.. So, there was a obvious divergence and a
reversal in sentiment that lower yields were a good
environment for the market..
My analysis suggests, in the next week, the long bond may
go as low as 125 (plus or minus) (now 127) and then begin
to move up to the 132 area.. So, the yield will again begin
to move downward. I wonder how the market will accept this..
Longer term I believe the 132 area is strong resistance and
the long bond will resume the downward trend (higher yields)
This, if true, should overjoy the bulls (widening yield curve).
But I find that a strange anomaly.. Because, up until July of
this year, lower yields were the driving force behind the bull
market. And, If my analysis serves me correctly (on the bond)
your suggesting just the opposite. (higher yield/strong equity
market...)
Ross |
