according to dow theory and the 50% retracement rule (which i learned about on this site) it looks like the T-bonds are shaping up for another shorting situation.

using i-shares as a proxy - if the long bonds (TLT) fail to pierce the 89.29 level (50% of the peak to trough price) then bonds should be a good short! TLT is currently at 85.29 and was down sharply the past 3 days (wed, thurs, & friday).

the 7-10 year T-bonds (IEF) 50% level is 86.48. it's currently at 84.74 - it too was down sharply on the same 3 days!

larry, does this look right to you? if so, i may want to short them next week.

thoughts?

-ja

Joe,

You must have read my mind. I’ll probably be shorting bonds or buying Profunds Rising Rates fund (RRPIX) in the Model Portfolio this week.

As far as the 50% Principle is concerned, I don’t know if you can apply it to the bond market or not. I know what I know about the principle from reading Richard Russell. And he knows what he knows from his mentor – the great Dow Theorist, George Schaeffer. Russell has written that Schaeffer only used the principle with the Dow and cautioned against using it with individual stocks. He did say that it could probably be used with other “major stock averages.” Having said that, I do know that Russell recently applied it to the gold market. So I guess that means that you could apply it to a major index like the long bond. But I don’t feel comfortable enough with it to say for sure, so for the time being I’m going to apply the 50% Principle to what I read from Richard Russell.

But 50% Principle or no 50% Principle, bonds look like they’re going lower to me. I’ll write about it in this week’s SMR.

Larry

i put in an order to buy profunds rrpix (rising rates opportunity) yesterday. i'll get in at the close today. looks like it was a good day to get in.

what do you think the price target should be - or, what are you using as a stop/loss?

using TLT as a proxy, which is currently at about 85 -
i was thinking of a sell stop 4 points away - a close above 89. the 200 MA is at 88 so 89 is just outside that.

do you have a better idea where to put in a sell stop or a profit objective?

thanks.

-ja

Larry --- Does shorting the dollar fit into your thinking at this time? If so what would be your method of choice? Bill

Joe,

I’m using for a stop loss a close of $USB (long bond) above its 200 day simple moving average. If bonds close above the moving average, I’ll just liquidate the long position in RRPIX in the Model Portfolio. You cold probably use TLT as well. But the 200 dma seems to represent good resistance for bonds. I don’t have a price objective. I think once bonds get going to the downside again rising interest rates will be a secular trend that can last for quite some time. I’m not looking at this as a short term trade.

Larry

Bill,

I’m definitely bearish on the dollar. There are six basic ways of profiting from a declining dollar – buy stocks of international companies, buy mutual funds that invest internationally, buy foreign stocks, buy mutual funds or exchange traded funds that invest in foreign countries (my choice would be Asia), buy foreign currencies, and buy gold.

My choice is to buy gold and gold mining shares because I think the stock market will remain in a primary bear market and I think virtually all currencies will be weak vs. gold.

Larry

Larry --- Have you noticed the continued strenght in FCX? Bill

Yes I have, Bill. That was a beautiful cup with handle breakout in June on that stock and I'm afraid I missed it. But the real leader in the past year has been the Chinese internet stocks like SINA - up about 2,000%.

Larry