Home > Uncategorized > General Update: 2010/02/26: Minor Setback in Fixed Still Points to Risks in Equities in Spite of Thursday Recovery

General Update: 2010/02/26: Minor Setback in Fixed Still Points to Risks in Equities in Spite of Thursday Recovery

▪  How can this be? Because since the turn of the major cycle back in June of 2007 the bond markets have for the most part accurately anticipated weak economic data to come. While we will have much more to say on that after today’s extended technical trend discussion, suffice for now to note a few items. First and foremost, US housing remains a mess that is deteriorating more rapidly once again. And in the wake of extremely weak US New Home Sales earlier this week, The US Existing Home Sales figures we will see shortly are a critical indication due to the degree to which it is assumed their strength is weighing on new home sales.

▪  As noted in yesterday’s TrendView BRIEF UPDATE, the March T-note back above the clear 117-10/-16 DOWN Break area accompanied by a very similar activity in most resilient sister March Bund back above its 122.70-123.00 area DOWN Break have Negated a month of attempted topping activity. And that points to a push back above early February highs in each of those markets; as the extreme level of a topping pattern that has been Negated is then ripe for violation on the reinvigorated trend. The specifics of the topping attempts were that the mildly rising lows of downside reactions since late January formed the Necklines of Head & Shoulders Tops in each of those markets; … 

▪  If that is so, it would mean that not only will the lead contract T-note push above the recent 119-00 area high; it is likely across time to push back above 120-00 to at least retest the low-mid 121-00 area. The outlying possibility is the 122-16 area (the Fibonacci 0.50 retracement of the entire swing from the extreme December 2008 high to the mid 114-00 area June 2009 lows not quite reached at the bottom of the recent selloff),… OR (fasten your seat belts) even back up into the 124-00/125-00 range to retest major gaps, congestion and the Fibonacci 0.618 retracement of the major downswing. Sound incredible? We agree. Yet those possibilities are not so far-fetched if we pencil in a retracement for DJIA of either a full 15% to back in the 9,100 area (its major cyclical down channel UP Break), and especially if there is any retest or failure below its distorted Head & Shoulders Bottom 8,800 UP Break. We shall see. 

▪  And what we also seem to know for certain in the current environment is that any overt return to weakness in equities would foment swings in other asset classes that includes US Dollar Index revisiting or possibly pushing above its important technical level that was as nearby as .8140-50 (reinforced by major downward channel from the .8963 March 2009 major high.) That would likely be due to further weakness in commodity currencies that have thrived in the risky asset reflation environment which seem to indicate potential for general economic revival.

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