Sv: Sv: june bonds - Why break to 104 is unlikely

["Stig Olausson" <olausson@xxxxxxxxxxxxx>]

Hi BOTT,

Below you state some arguments, why, in your opinion, a severe decline (to
104) in Bondprices is highly unlikely. 
IF however we should get there, I am certain someone, somewhere could find
arguments for rates to be correctly at 6.5% (your calculation), which, in
my opinion is the problem with fundamental analysis. 
For the sake of argument, WHAT would change your mind? WHEN would you start
to think that perhaps we are seeing 6.5% rates?
Subscribers to TA often have pricelevels to help them change their minds. 
What do do fundamental students use?

I am not saying we ARE going to see 104. 

The POTENTIAL, however, in the Head & Shoulder pattern SUGGESTS (experience
from other similar patterns) a minimum decline to 104. I believe there is a
65% success rate on H&S patterns. I don't know the success rate for
opinions.
Of course patterns are subject to interpretation (as we saw on this list
after I posted the H&S pattern) and failures are not uncommon either. But
if we have a failure, at least we know when the pattern have failed (new
brake of neckline). 
When do we know when we failed on our opinion?

By the way Armstrong's World Capital Market Review, was just published and
although he is bullish on bonds and have a target of 156, he doesn NOT rule
out a fall in Bondprices since he states support levels at (charts through
4/19) 120.04, 117.28 AND 102.05-105.24. (104 would be right in the middle
of the last level...)

By the way, didn't it seem higly unlikely 2 years ago that we would reach
11000 on the Dow??

regards
Stig


----------
> Fra: BOTTrader@xxxxxxx
> Til: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
> Emne: Re: Sv: june bonds - Why break to 104 is unlikely
> Dato: Thursday, May 06, 1999 4:24 PM
> 
> If bonds break from current levels just under 120, down to 104, that's 
> roughly a 13% price drop - which would drive interest rates up to the
6.5% 
> level.  At 6.5%, the average home buyer is going to be able to buy 13%
less 
> total home square footage, 13% fewer cars, etc.  Effectively, 13% of the 
> average borrowers marginal free income stream is going to be taken out of

> commission.  And this is the credit fuel that drives the
interest-sensitive 
> portions of our economy that make the difference between growth and
recession 
> ( and thereby the difference in the direction of stock prices) . An 80
basis 
> point interest rate hike is amply enough to grind this economy to a soft 
> landing pancake if not worse.  In today's economy, an interest rate
change of 
> even 20 or 25 basis points can make a serious change in overall activity.
  
> THIS is where technical analysis benefits from some "tempering" by 
> fundamental analysis.