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Stewart, the chart may not look very good right now, but what about the
fundamentals? As Robert pointed out, Fed rate cuts will be bullish, but
here's two other things to consider. The federal government has gone from
running $300+ billion annual deficits to de facto surpluses in just a few
years. You can't just look at demand, you have to look at supply as well,
and that's an enormous contraction in a short period of time. The other
bullish fundamental is the inevitable decline in the inflation premium
expectation from bondholders. In an era of disinflation, bond purchasers
will accept a smaller spread between real and nominal interest rates, which
will result in higher bond prices.
Bruce
>
>When the market is in the beginning of a liquidation phase, oversold means
>little and as far as I can tell there are absolutely no signs of
>accumulation in the intraday charts. For me to think about fresh longs I
>will need to see overtly bullish behaviors (at the least a poor result of
>effort or a selling climax.. auto rally formation).
>
>Look at the sharp declines in open interest. As far as I can tell it is
>going to take new buying to put the market higher... the speculative short
>base was wiped out on the rally to 135.00.... now longs are scrambling to
>get out.
>
>It might bounce but I think that there will be much better bets.
>
>At 08:49 PM 10/12/98 -0500, Robert W Cummings wrote:
>>
>>Bonds have broken 9 points in 5 trading sessions anybody but me thinking
>>maybe bonds a little oversold now?
>>Is buy yen sell bonds the new way to trade for the next couple of weeks,
>>years? I heard today the break in the dollar meant about a point and a
half
>>discount in interest rates. So if the Feds cuts rate bonds going down on
>>that as well, how fast things can change in markets.
>>
>>Robert
>>
>>
>Stewart Taylor
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