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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: Killswitch who wrote (14836)	10/20/2002 9:21:25 PM
From: Killswitch	Read Replies (1) \| Respond to of 19219

ANNANDALE, Va. (CBS.MW) -- While the stock market's amazing rally over the past week has gotten the lion's share of media attention, the corresponding plunge in bond prices has received relatively little notice. Yet a case can be made that what's happening to bonds is an even bigger story than what's happening in equities. On the face of it, of course, bonds appear to have fallen by far less than stocks have risen: T-Bond futures have dropped by 5.1 percent from their high of a week ago, in contrast to a 13.3 percent increase for the Dow Jones Industrials. But note carefully that bonds normally are far less volatile than stocks. In fact, when their conservative nature is taken into account, bonds' 5.1 percent drop may very well be larger than stocks' percentage rise. It would be easy to draw bearish conclusions from bonds' momentousness. But a contrarian analysis of bond timing newsletters reveals that the recent decline has more in common with past bull market corrections than it does to the beginnings of a bear market. This analysis is based on recent readings of the Hulbert Bond Sentiment Index (HBSI). This index measures the average recommended bond market exposure among the investment advisory newsletters tracked by the Hulbert Financial Digest. As of Thursday's close, this index stood at -41.7 percent, the negative reading meaning that the average bond market timer the Hulbert Financial Digest tracks is significantly short the market. Not only does this -41.7 percent reading reflect widespread bearishness in absolute terms, it also represents pervasive bearishness in a relative sense. As recently as October 11, for example, the HBSI stood at +2.8 percent, or 44.5 percentage points higher than where it closed on Thursday. If this were the beginning of a bear market, chances are that bond timers would be much more bullish, if not excessively so. Bear markets, after all, like to descend a slope of hope. Bull markets, in contrast, like to climb a wall of worry. And the sentiment that advisers are exhibiting today, as well as that which they exhibited all year, forms a classic wall of worry. Consider: During the long bond's 18 percent rally between March and earlier this month, the highest the HBSI ever rose to was 21.8 percent. Its average level throughout this six-month rally was -9.0 percent. The bottom line: Bond timers, on balance, never believed in bond's bull market this year, and so they never jumped on that bandwagon. Yet, now that bonds are declining, these timers are wasting no time jumping on the bearish bandwagon. From a contrarian point of view, these are bullish omens. cbs.marketwatch.com