8 Charts: What Will Treasurys Do This Week?

With the breakout of the CRB index and simultaneous weakness in commodities, we now believe that there are clear and tradable trends in the following markets.

1. World equity
2. Commodity
3. Precious metals
4. Corporate bonds
5. Currency - USD
6. Currency - High Yield

The strength is broad based and not just driven by a relative few stocks/commodities or sectors. Inter-market dynamics are largely supportive of the trends - by this we mean the strength in CRB was support by strength in both high yield currences and junk grade bonds.

U.S. Treasuries are still a bit of a quandary to us. Some weakness we can see, but not enough to signal a breakdown. We see continued pressure here and are reasonably confident that a breakdown will happen, it is just a matter of when the market is good and ready (wishful thinking? perhaps).

Dow World and Dow World Small Caps continue upward momentum.

U.S. Treasuries: Yes, some weakness but we are looking for a TLT to fall below 88 before we would feel somewhat validated. We were rather amused by an article on Bloomberg titled: "Treasuries Show No Lost Appetite With Zero Dollar Returns".

Junk Grade Bonds continue upward momentum. Junk grade bonds are to risk takers in financial markets as the proverbial canary is to coal miners. Whilst junk grade bonds are rising the canaries remain alive!

The CRB Index has gone nowhere for 4 months, history shows that when it breakout occurs, it is usually a violent one.

USD Index: Oh dear, whatever will stop the freefall? Perhaps a fall of around 5% in a week may exhaust selling pressure. We suspect that one of the hardest trades over the coming weeks/months will be holding on to short positions in the USD and resisting the temptation to "take-profit".

DBV is the canary of currency markets! DBV tells you more or less all you need to know about the health of world financial markets.

Let's see what happens with U.S. Treasuries this week. Good things take time!

Disclosure: Long EEM, GWX, DBC, SLV, TBT, JNK, DBV, UDN.

Comments

[Ron Rowland:]

"...the breakout of the CRB index and simultaneous weakness in commodities..." ???

Oct 19 05:24 PM

[Daily Trading:]

Yikes..

Thanks Ron.. that is indeed a bit Pete Tong.

Intended to be ".. the breakout of the CRB index and simultaneous weakness in US Treasuries.."

DT

On Oct 19 05:24 PM Ron Rowland wrote:

> "...the breakout of the CRB index and simultaneous weakness in commodities..."
> ???

Oct 20 01:20 AM

[Daily Trading:]

Oh bother..

That's wrong as well.. not one of my better days this..

Actually intended to be ".. the breakout of the CRB index and simultaneous weakness in USD.."

Apologies for being a plonker.

On Oct 20 01:20 AM Daily Trading wrote:

> Yikes..
>
> Thanks Ron.. that is indeed a bit Pete Tong.
>
> Intended to be ".. the breakout of the CRB index and simultaneous
> weakness in US Treasuries.."
>
> DT
>
> On Oct 19 05:24 PM Ron Rowland wrote:

Oct 20 02:05 AM