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US Treasuries & Our Bear Market

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By Woolybooger1
March 16, 2009

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Hi Folks,

Whew what a crazy week huh? Won't get into all the trading stuff this weekend. Well, okay, maybe just a little. It was the day job that really kept me occupied this week. The Market just enjoyed going up! I was cool with that...Until Friday.....(Big Grin)

I really have been having the toughest time sorting through possibilities. I do not just want to see things right, I want to actively pursue trades and/or investments that use "what is going on now" to my best advantage.

So again we revisit 2 issues.

(1) Treasuries (Shorting them)
(2) Bear Market Rallies or we have bottomed

I went back and read a fair amount again on this board and elsewhere on the WWW and see that Treasuries will suffer once we see the hint of inflation taking hold. While many will disagree (and I can't blame them) we are told there is no inflationary pressures at the moment. Sorta hard to believe though when we look at real life. Sure Oil is down on decrease demand. Airlines are fighting for their lives and cutting fares with their business drying up or at risk. Even cruise lines are following suit. It appears than many things that are more...shall we say demand driven or discretionary...are going down in price. Food, staples, products of many kinds however, haven't budged, and have even seen modest increases. Deflation, Contraction, Stagflation...I hate those subtleties.

I was watching a nice video linked from a Fool poster of a Canadian interview. Very balanced and informative. Felt Treasuries would suffer, inflation was definitely coming, (no way around it), and that hard assets including many commodities would be the way to go over the next 2 years. This included oil. Made sense to me. Timing was the more difficult thing.

I have noticed that viewing what we are now doing, as being similar to what Japans did in their now 2 lost decades is only partially true. Not really comparing apples to apples, but definitely some similarities that are hard to split out in any meaningful way. At least to this little Woolybooger.

Here is a good chart on Shorting the Treasuries

http://stockcharts.com/h-sc/ui?s=tbt

It always helps me to put things into
(1) the landscape configuration
(2) 6 month time frame
(3) separate the volume from the chart

Stockcharts just wont let me do that and copy and paste.

If you change the chart the way I have mentioned above you can see that there is wide agreement that Treasuries are considered "at risk". See the volume change after the precipitous drop in November. I'm not saying now is the time to short Treasuries, but I would understand if you started looking at that as a potential now.

If support is found at the 50 day moving average I will be short Treasuries. If it breaks through I expect it to test the lows. I am not leaning that way however.

Bear Market rallies are like Sharks; or at least that is what was posted earlier. It got my attention, but it didn't really conjure up a picture in my mind that was contextual. Bear Market rallies are so variable that I hesitate to generalize too much. If you look back at all the "crashes" of the past, they have taken on many different forms. Sharp and short, long and protracted. I suppose I think more of the old metal balls hanging down clacking back and forth. Momentum one way and then another. Back and forth until all the energy was dissipated. Then a bottom was reached. Still not a very good analogy. Bear Markets just wear investors out. If they don't take your money, they just finally wear you out of the Market. As long as it is popular to "call the bottom", I doubt we have seen it. Heck, maybe we have; just sorta doubt it.

Plan

(1) Buy long oil at some point
(2) Short Treasuries at some point
(3) Stop shorting the indices at some point
(4) Continue to trade and preserve capital at all costs.

Well, I just felt sorta helpless this weekend. Lots of interesting posts, but no clear signal from anywhere as to "where we go from here".

Call a bottom for the DOW? Nah

Call a top in Treasuries? Maybe

Call a bottom in Oil? Not yet

Call a bottom in Financials? Don't see how really.

Call a bottom in GE? That actually may be a possibility.

As we move forward Natural Gas, renewable energy, decreasing worldwide demand all play a role in our recovery. Be it near or far off, that has to play a role in how we invest in food, commodities, oil, financials, tech.

Hard to bet against the Financial Strength of the US Govt., but it ain't what it used to be is it?


Wooly...who still thinks this Bear Market Rally is nearing its end...been wrong before...will be again.