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<x-rich>Realtraders,
Over the last few days and weeks there has been a lot of discussion
regarding movements in the S&P and the Dow. However, I just thought I
would show you this 60 minute chart of the US 30-yr bond yields going
back to the end of Decemgber '96.
Without getting into a lot of explanation, many of you will probably
notice the horizontal resistance area at the 6.300% level in this yield.
If you have this short-term chart available, take a look at some of the
oscillators and indicators and you will probably notice some divergence
taking place. In the graph that I have attached, I have included the
MACD as an example.
Based on recent comments by many analysts (as seen on CNBC and other
business programs), we are in a great "bond market love affair" and
everybody is looking for levels of 6.00% or lower, any time now. Are
they not looking at charts such as this? I don't know, but based on what
I have learned through the years, past market turns often act as future
support and resistant levels, at least temporarily. Isn't that what we
have now? Just something to think about.
Furhter, interesting fact that I heard yesterday. IBM, over the last
10-15 years, has issued new debt to the public (in the form of bonds and
notes) seven (7) times. Amazingly, on 6 of those occasions, IBM has
issued that debt at market lows! (Sorry I don't have a graph to show you
but I did see one on TV). Now, guess what, yesterday (7/30/97) IBM has
again issued 1 Billion in new debt to the public! Is IBM calling the
bottom again?
Finally, please don't mistake this post as bearish toward the bond
market and/or the indirect implications toward the stock market due to
the bond-stock market relationship. But if this technical pattern in the
bond chart holds, then we should expect an uptick in bond yields. Since
I am a symmetry wave kind of guy, I thought I would give you my brief
interpretation of what I see. Quickly, I see two wave structures. The
smaller one measures 107 basis points and the larger one measures 180
basis points. Therefore, based on the current low as of this writing
(7/31/97 2:45pm est) the low on the bond yield is 62.85 or 6.285%. Just
add 107 +/-21 (20% rule) to that low and you get a bond level of 6.392%
or roughly 6.4%. On the larger structure, you get an approximate level
of 6.460%. Thus, if this market does reverse and no new lows are made, I
would expect bond yields to rise to the levels indicated above. If we do
make a new lower low (lower than 6.285%) just recalculate the 107 and 180
bpoint rise accordingly.
Finally, as I said, please do not take this post as bearish but rather
simply a <italic><underline>normal</underline></italic> pullback in a
market that has declined 500 basis points or a 1/2% in the month of July
alone.
Over the longer term, I too see lower levels in bond yields later this
year and maybe even later this month. As for the stock market, any rise
in interest rates will adversely affect the equities markets and maybe,
just maybe, we will get a small (4-7%) pullback in the stock market. At
which point, I should be over 100% invested (margin) on our way up to
8800-9200 on the Dow.
Has anybody else been following this bond market?
Have a good day.
John Boggio
</x-rich>
Attachment Converted: "c:\eudora\attach\yld3107.gif"
<x-rich>
For recent commentary and more informations regarding SymWave, please go
to:=20
<center>Commentary: http://www.realtraders.com/boggio/disc7_toc.htm=20
Info regarding SymWave: http://www.realtraders.com/boggio/boggiobio.htm=20
=20
</center>Thank you.</x-rich>
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