Wednesday, June 27, 2007

Bonds - Checking in on the Lehman 20yr bonds fund also known as the TLT's this rally looks like it is about to fizzle out. Volume has been very light and we are now into heavy resistance area of June 7 gap down. (mind the gap) High tick that day was $84.71 so this is looking like a nice short entry point. Conversely the 10yr yield ($TNX) is pulling back to the gap up support zone. Bond yields will go much higher than anyone currently believes possible. Look no further than how bond rates fell further and far longer(the better part of 2 decades) than anyone would have thought possible. You would have been laughed out of business suggesting buying long term bonds in 1980-81. This is a sea change event with this yield rally, govern yourself accordingly. By my count 5 descending trend lines on the $TNX have been broken.

They are in order form high point:
158.40 (15.84%) on Sep 1981
139.90 on May 1984
102.30 on Oct 1987
80.20 on Nov 1994
67.80 on Jan 2000

SRS - sticking with it even with potential outside reversal bar in progress on heavy volume. I was shaken out of my DIG position Ultra oil and gas proshares prematurely by not being patient with my winner, and it cost me. Entry was 76 and yours truly got shaken out at 86. Yes I know it went to 105, hence we must remember Livermore's advice to be extremely patient with your winners and inordinately impatient with your losers.

For you buy the news traders, (even though I cringe at the thought) ORCL is at major resistance of $20. You will need a 15 yr chart to see it but its there. For you MOT bulls I know a lot of hedgies(SAC especially) and even some value players have some decent long positions in this one. The tape continues to point down though. The gap down Jan 5 this year thru the trend line coming from the April 2003 lows was not a good sign. And speaking of SAC, SHLD better hold 165. A trendline form 2003 was broken thru $170.

Japanese Yen - thru $82 would make me happy as it would break the downtrend line from March 28 this year(yes I am a stickler on trend lines, from the highest high touching the highest high before the lowest low, no cheating). The inherent attraction in this trade for me is that I think we can count on 2 hands how many yen bulls there are globally. I mean really is there a trade out there more one sided?

Consumer Goods - $62 is the line in the sand for IYK. Again my preferred vehicle is the Ultrashort proshares ticker SZK, and no you news traders, a good report from Nike does not change my opinion, actually emboldens it because I am not looking in the rear view mirror, which is what I think of news.

A few blog entries back I wondered aloud on the Saudi equity market (TASI) and the 65% drop since early 2006. Standing over an uphill 6 footer for par (which I don't mind saying I made, need those, keeps ya comin' back) I got to thinking about the decline and the state of the Saudi economy, which is exactly what it is, the state, and it got me to thinking. The nationals of any country regardless of standing and status internationally(1st or 3rd world) are usually in the know. It seems to me that they have been selling and if they are not selling then they sure as heck are not buying( it takes a lot of buying to put a market up it takes a mere lack of buying to put a market down.) Take this a step further why are they not buying do they fear a royal family overthrow. Do they poor economic fundamentals on the horizon, or do they the ones in the know, have any insight as to whether the Kingdom's stated oil reserves (remember these are unaudited and unverified by any outside independent sources) are baloney or not? Something to consider.

I saw a piece over the weekend showing a BP Statistical Review that during the Iran-Iraq war Iran's stated oil reserves went from 60 to 90 billion bbls which represents a 50% increase. Iraq's stated reserves went from 30 to 100 billion bbls. which represents a 233% increase. Now this is during a war that ravaged both countries. Anyone who still believes in the sanctity of these stated reserve numbers of which OPEC member production quotas are based, well then I have a bridge I would like to sell you. Insults what little intelligence I have. Good luck and good trading to you.

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