I Don't Think We're in a Bond Bubble

Aug. 25, 2010 5:10 AM ETTLT, GLD, DUG, DIA, FXE, BND6 Comments

3.68K Followers

The yield on the 10-Year US Treasury tested of my quarterly risky level at 2.495 as expected. Gold found a strong magnet at my semiannual pivot at $1218.7. Crude oil is showing no nearby value levels. The Euro continued to trend below its 50-day simple moving average at 1.2746. For the Dow my minor weekly value level at 10,035 provided a magnet, but there are no longer-term value levels given a break to the downside today. Watch the 50-day and 200-day simple moving averages as a bearish cross-overs looms for Transports. The SOX had a negative cross-over on Tuesday.

10-Year Note – (2.499) My annual pivots are 2.813 and 2.999 with weekly and quarterly pivots at 2.574 and 2.495, and daily and semiannual risky levels at 2.443 and 2.249. Note that the decline in yield is extremely overdone.

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Courtesy of Thomson / Reuters

Comex Gold – ($1232.5) Weekly, quarterly, monthly and annual value levels are $1159.5, $1140.9, $1133.2 and $1115.2 with my semiannual pivot at $1218.7, and daily and semiannual risky levels at $1240.2 and $1260.8. Note that gold is overbought on its daily chart.

Courtesy of Thomson / Reuters

Nymex Crude Oil – ($71.39) My quarterly value level is $56.63 with daily and weekly pivots at $72.14 and $73.59, and annual risky level at $77.05. My monthly and semiannual risky levels are $80.02 and $83.94. Note that crude oil has become oversold on its daily chart.

Courtesy of Thomson / Reuters

The Euro – (1.2672) Quarterly and monthly value levels are 1.2167, 1.1486 and 1.1424 with a daily pivot at 1.2698, and weekly and semiannual risky levels at 1.3276 and 1.4733. Note that the euro is oversold on its daily chart.

Courtesy of Thomson / Reuters

Daily Dow: (10,040) My quarterly value level is 7,812 with a daily pivot at 10,162, and weekly and annual pivots at 10,358 and 10,379, and monthly, semiannual and annual risky levels at 10,439, 10,558 and 11,235. My annual risky level at 11,235 was tested at the April 26th high of 11,258.01.

Note that the Dow is below 21-day, 50-day and 200-day simple moving averages at 10,450, 10,299 and 10,455.

Courtesy of Thomson / Reuters

Watching the 50-day and 200-day Simple Moving Averages: Remember back in early July when Wall Street traders were worried when the 50-day simple moving average for the S&P 500 fell below the 200-day, which was called a huge bearish warning. My comments were that to be significant all of the major averages had to have similar patterns. There are two so-called leadership indices that have yet to have the 50-day cross below the 200-day and one is occurring today.

The Philadelphia Semiconductor Index [SOX] reached a new low for the move on Tuesday and the 50-day crossed below the 200-day at $349.14 and 349.73.
The Dow Transportation will be the last to have the negative crossover as the 50-day and 200-day simple moving averages at 4271 and 4240.

Existing Home Sales plunged a record 27.2% in July to its lowest pace in fifteen years, an annual pace of just 3.83 million units.

I do not think we are in a bond bubble. I believe that the US Treasury Market is the most honest market and today these low yields are a sign of pending Deflation and investors are buying to preserve the buying power of their dwindling cash on the sidelines. It's like we are turning Japanese as they have had low yields for many years now. If it was a bond bubble it would have popped by now on a US economic recovery, which is fading fast. The yield on the 10-Year was at today’s levels in early-March 2009 with the Dow around 6,500.

Disclosure: No positions

This article was written by

Richard Suttmeier

3.68K Followers

I am the Founder & CEO at Global Market Consultants, Ltd. I consider myself as a Financial Engineer with an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. In 1972 I began my career in the financial services industry trading U.S. Treasury securities in the primary dealer community. I became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gave me the insights to be an expert on monetary policy, which I feature in my newsletters, and market commentary. I formed Global Market Consultants Ltd at the end of 1988 and expanded on my analysis to include proprietary analytics. While operating Global Market Consultants I was the U.S. Treasury Strategist at Smith Barney 1991 through 1995, was Chief Financial Strategist at William R. Hough in St. Petersburg, Florida 1997 through 1999, and was Chief Market Strategist at Joseph Stevens 1999 into 2008. I began covering U.S. equities in 1997 and began to use ValuEngine as my stock screening tool in 2002 before joining them as Chief Market Strategist between September 2008 and November 2014. I was the Chief Market Strategist at Niagara International Capital Limited between December 2009 and December 2014. In 2005 through 2007 I wrote columns on RealMoney.com and authored TheStreet.com Technology Report. My unique coverage called for the housing bubble to pop in 2005 and for regional banks to collapse in 2006 and early-2007. This is when my proprietary analytics became known as value levels at which to buy on weakness and risky levels at which to sell on strength. I became an Expert Contributor for TheStreet.com in April 2012 and currently write one or two stories a day covering subjects such as: The housing market, community and regional banks, momentum stocks, earnings profiles both before companies report quarterly results and provide scorecards after reporting results. Many of my stories we include moving averages, momentum readings, analysts’ earnings estimates, and value levels and risky levels. Over the years I made frequent appearances on financial TV beginning in 1993 on CNBC covering the U.S. Treasury auctions and as a substitute for John Murphy on his segment called ‘Tech Talk’. I also occasionally appeared on CNN and Bloomberg. On almost every holiday I appeared for an hour covering stocks on a call-in / email-the-expert ‘Talking Stocks’ show on CNNfn. In 2002 I had my own show on Yahoo Finance TV called, ‘Traders’ Club with Richard Suttmeier’. When Fox Business began in late-2007 I was a frequent guest on ‘Money for Breakfast’. I also made appearances on Reuters TV, Yahoo Finance Breakout and BNN in Toronto. In recent years I shifted my focus to making presentations to various investor groups such as: MBA students at the University of Florida and South Florida, The American Association of Individual Investors, Wells Fargo Advisors, The Executive Form at the National Arts Club in NYC, Investors Roundtable of Wilmington NC, The Market Technicians Association, The Information Management Network when they cover Florida Banks in Ft Lauderdale, and the University of Tampa Investment Club. I was president of the Society for the Investigation of Recurring Events in NYC from 2000 into 2009. My background began on Long Island, New York. I graduated from Bay Shore High School in 1962, and was a member of the Honor Society, Golf Team, Math Team and Band. I graduated from Georgia Tech in Atlanta with a Bachelor of Industrial Engineering Degree in 1966, and was a member of Chi Phi Fraternity, the freshmen Golf Team, and was the captain of the Bowling team. I won the South East Regional Bowling Tournament in 1964 and won the National Intercollegiate Bowling Championship in the Doubles Event that same year. I graduated from Brooklyn Poly in 1970 with a Master of Science in Operations Research, Systems Analysis. My first job out of Georgia Tech was with Grumman Aerospace on Long Island 1966 through 1970 with project assignments on the Lunar Module and F-14 Tomcat Fighter Jet contract proposal. I was with Bank of New York in 1971, as the Senior Systems Analyst for computer applications for the Bank’s International Division. When I shifted my to Wall Street In 1972 I became a U.S. Government securities trader at Briggs Schaedle, a primary dealer where my father was Vice Chairman and my brother was Sales Manager. In 1977 I joined Loab Rhodes as a U.S. Treasury trader. Then my career advanced as noted above. I have been married to Linda since June 1969 and we are the parents of Stephen and Jason Suttmeier. Stephen has been married to Jennifer since 2004 and we have a granddaughter Emily and a grandson Robert. We have been living in Land O’ Lakes, Florida with Jason and his partner James since June 2009.

I Don't Think We're in a Bond Bubble

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