Before getting to the main message, I’d like to note that I’ll be speaking this Thursday in Markham, Ontario on – what else – Technical Analysis. Admission is free. If you are located anywhere near that area, I’d love to meet you personally. Come out and join the discussion! Here are the details;
Markham, Ontario: Markham Public Library- Markham Village Library Branch, 6031 Hwy 7 E. Markham, ON L3P 3A7. Thursday May 15, 2014, 7PM
A shift from stocks to bonds
The S&P 500 continues to vacillate – as it has since March. This type of movement is certainly presenting a “new look” to the market’s technical profile. The US market has gone from a nice steady uptrend over the past year+ into a sideways consolidation. This may be a sign of change to come! The shift in money seems to be moving out of “risk on” towards the ‘risk off trade”- as mentioned back on April 7th: http://www.valuetrend.ca/?p=2885. One of the “risk off” shifts has been a movement into bonds by traders.
Someone at one of our recent library seminars asked me why I like bonds right now, given the outlook for interest rates to eventually rise. I’d like to point out that my view on long bonds are as a summer trade only—not for a long-term hold (I do like short duration bonds as an asset allocation platform). A summer rally for the long bond is probable. My evidence behind this observation is:
- the chart (double bottom base breakout),
- the seasonal period of strength (May – October),
- the sentiment profile (pessimism towards bonds has been overdone—see http://www.valuetrend.ca/?p=2885)
I’ve printed this chart before, but here is the long bond chart again, with targets.