January 29, 2017 This Week...
This week we are looking at the most optimum trades for everyone to take as always. I don't really care with these recommendations as it is simply a matter of key entry. I am sticking with the theme around Bonds. US Bonds or whatever Bonds you want to trade. I am assuming the opposite side of the trade that most of the pundits and fund managers are talking about.
This of course is the ongoing bear market in Bonds. I don't think so just yet. Maybe next year or the year after but I suspect that there is not going to be any significant rises in bond rates just yet. In reality other than inflationary pressures there simply is no reason for the markets to take this seriously. The Fed has openly discussed raising rates this year but that does not constitute the popping of the trillion dollar bond bubble just yet. You can see that the 17% crash in bonds happens from time to time and I think that this is about as far as we are going to see them fall. Risk to reward states that this is a good trade to be long Bonds. If we are wrong I will keep you posted but as you can see from the chart below I am long 5 contracts from the base of the move. Even if we only get sideways action for the next few months which I think is a distinct possibility we are basing a lot of this on the projected moves of the Dollar. You are either in the Dent camp which figures deflation to win out in which case interest rates will continue to stay where they are or fall or you are in the Gold bug camp where you figure that inflationary pressures will lift Gold. 5-10K an ounce as some are predicting is a little surreal for me. I doubt this very much as inflation would have to become a real factor in order for this to happen. I don't think that either of them are right at the moment. While I don't see any significant moves down in the Dollar just yet I suspect that it may happen over the next year or two. All you really have to do is look cyclically at currencies in their macro trend to know that they move in 7-10 year cycles. For example the Euro rose heavily between 2001 and 2008 interrupted only by the financial crisis of 2008. Before that it was high when the Deutsche mark was the currency. It bottomed at 0.9700 area before embarking on its rise as a result of the crashing dollar. So has the EURO bottomed? Perhaps because it was close to the area where I expected it to bottom.
If the Dollar begins to sink then bonds will once again be a buy. However I don't expect it to sink too much as the economy is caught between the forces of inflationary effects in certain area while deflation remains a key factor. Sort of a stagflationary effect like the 70's. This causes bubbles to form in certain areas but the overall market to remain mired in a sideways like motion. Anyway check the chart and that is what I think you should be doing. Looking for short in oil is not a bad idea either.
This of course is the ongoing bear market in Bonds. I don't think so just yet. Maybe next year or the year after but I suspect that there is not going to be any significant rises in bond rates just yet. In reality other than inflationary pressures there simply is no reason for the markets to take this seriously. The Fed has openly discussed raising rates this year but that does not constitute the popping of the trillion dollar bond bubble just yet. You can see that the 17% crash in bonds happens from time to time and I think that this is about as far as we are going to see them fall. Risk to reward states that this is a good trade to be long Bonds. If we are wrong I will keep you posted but as you can see from the chart below I am long 5 contracts from the base of the move. Even if we only get sideways action for the next few months which I think is a distinct possibility we are basing a lot of this on the projected moves of the Dollar. You are either in the Dent camp which figures deflation to win out in which case interest rates will continue to stay where they are or fall or you are in the Gold bug camp where you figure that inflationary pressures will lift Gold. 5-10K an ounce as some are predicting is a little surreal for me. I doubt this very much as inflation would have to become a real factor in order for this to happen. I don't think that either of them are right at the moment. While I don't see any significant moves down in the Dollar just yet I suspect that it may happen over the next year or two. All you really have to do is look cyclically at currencies in their macro trend to know that they move in 7-10 year cycles. For example the Euro rose heavily between 2001 and 2008 interrupted only by the financial crisis of 2008. Before that it was high when the Deutsche mark was the currency. It bottomed at 0.9700 area before embarking on its rise as a result of the crashing dollar. So has the EURO bottomed? Perhaps because it was close to the area where I expected it to bottom.
If the Dollar begins to sink then bonds will once again be a buy. However I don't expect it to sink too much as the economy is caught between the forces of inflationary effects in certain area while deflation remains a key factor. Sort of a stagflationary effect like the 70's. This causes bubbles to form in certain areas but the overall market to remain mired in a sideways like motion. Anyway check the chart and that is what I think you should be doing. Looking for short in oil is not a bad idea either.
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