Long End Treasury Yields Falling

With the 2 year Note Yield at record lows and the 5 year near record lows, I wanted to examine how much further they could fall and how much further the 30 year bond could fall to catchup to the levels seen when the 30 year made record lows December 18, 2008.

The Chart below shows yields on the 2,5,10, and 30 year going back to January 2008.

The Chart below shows the yield spread between the 30 vs 2, 30 vs 5. I also divided the 30 yr by the 2 year and the 30 year by 5 year to see the spread at a more magnified view.

The 2 year has breached 2008 lows and is making new record lows, while the 5 year is 20 basis points from the low of 1.266 set December 18,2008. The 30 year has a long way to go if it is to catchup to the yields it saw during December 2008 lows. Given the Short end of the curve has already hit or is near record lows, how much further does the 30 year have to drop to catchup?
The 30 year made a record low of 2.53% on December 18, 2008, which means as of Fridays close the 30 year trading at 3.87% would have to drop 1.34% or 134 basis points to retest those record lows.

With ZB currently trading around 132, we could expect ZB to rise all the way to 142 if yields are to retest December 2008 lows.
Here is a chart of ZB Trading Today August 15, 2010.

Here is a chart of ZB trading under the March 2008 contract during the period of December 2008.

Here is a good article from Bond Squawk on Negative Tip spreads.

If negative TIP spreads don't currently forecast rising inflation, but just a reduction in forecast GDP and economic growth, then would gold be a good investment? Most people believe gold is a good inflation hedge; however, Mish Economic Analysis found Gold to be a better investment during periods of Deflation as opposed to periods of Inflation.

So what should we do? Bet on Deflation and a possible double dip recession? Buy the long end of bonds, go long gold, and stay out of stocks? We shall see in time what happens.

Long End Treasury Yields Falling

With the 2 year Note Yield at record lows and the 5 year near record lows, I wanted to examine how much further they could fall and how much further the 30 year bond could fall to catchup to the levels seen when the 30 year made record lows December 18, 2008.

The Chart below shows yields on the 2,5,10, and 30 year going back to January 2008.

The Chart below shows the yield spread between the 30 vs 2, 30 vs 5. I also divided the 30 yr by the 2 year and the 30 year by 5 year to see the spread at a more magnified view.

The 2 year has breached 2008 lows and is making new record lows, while the 5 year is 20 basis points from the low of 1.266 set December 18,2008. The 30 year has a long way to go if it is to catchup to the yields it saw during December 2008 lows. Given the Short end of the curve has already hit or is near record lows, how much further does the 30 year have to drop to catchup?
The 30 year made a record low of 2.53% on December 18, 2008, which means as of Fridays close the 30 year trading at 3.87% would have to drop 1.34% or 134 basis points to retest those record lows.

With ZB currently trading around 132, we could expect ZB to rise all the way to 142 if yields are to retest December 2008 lows.
Here is a chart of ZB Trading Today August 15, 2010.

Here is a chart of ZB trading under the March 2008 contract during the period of December 2008.

Here is a good article from Bond Squawk on Negative Tip spreads.

If negative TIP spreads don't currently forecast rising inflation, but just a reduction in forecast GDP and economic growth, then would gold be a good investment? Most people believe gold is a good inflation hedge; however, Mish Economic Analysis found Gold to be a better investment during periods of Deflation as opposed to periods of Inflation.

So what should we do? Bet on Deflation and a possible double dip recession? Buy the long end of bonds, go long gold, and stay out of stocks? We shall see in time what happens.

GOLDs Biggest Gain ever!?

Holy Smokes, Gold up over 80pts today!!!!

WowZer'S.....

Commodity Bounce

Well it was bound to happen. The question is, whether the bounce in commodities will have legs and keep crawling up to new highs for Gold and Crude Oil, or if this pop is simply a bounce in a down trending market. With tensions seen again in financials it is logical to see this bounce happen, but we will all have to wait and see what happens.

The Euro bounced

Gold bounced 50pts off its lows. Its interesting to hear the difference in commercials for gold right now. Right now I'm hearing commercials telling people to cash in their gold jewelry for cash, where as when gold was near its highs I was hearing commercials telling people to trade commodities like gold.

Crude Oil September contract expired and the new front month contract saw a big pop.

Worst Trading Call Ever

I sure hope people use good stops. I made probably the worst trading call ever on Gold last week. I took my loss on it a few days ago. Gold has dropped over 200 dollars in less than a month. THAT IS HUGE! If you bought gold this year, you are now in the red. WOW! Crude Oil is holding up relatively well. But the metals are getting destroyed as money is flowing into the US dollar and out of GOLD and metals.

The Euro is below 1.47.


Bernanke and Co. must be laughing now. They saved the banks by banning naked short selling. Oil has dropped 30 dollars. Commodities and Ag's are plummeting. And the US dollar is close to its yearly high. All this has happened in 1 MONTH. Major REVERSALS happening in Forex, commodities, and Financial stocks. Beware though, this is OPEX week, so we could see a sharp bounce/reversal in these markets soon.

Major Themes

38% Fib Retrace on Gold
Euro at bottom of monthly channel
30yr bonds went to auction today, ZB shot up pretty hard.

I'm looking at taking possible long positions in Gold and Euro at these levels. The Euro has been getting demolished the last couple weeks. I'm also neutral on ZB short term and Long term bearish.

Frustrating Day

Today was a very frustrating day for me. I traded everything today. Bonds, gold, Crude Oil, the stock indices, and the Euro. I'm quiting an hour early because I'm, well, frustrated and don't want to make any stupid mistakes. The morning began with some decent scalps and then getting stopped out on ES 2 ticks away from the morning HOD. That ticked me off.

Next up, the EURO got completely faded after the morning report of the US GDP report that was lower then estimated. Who ever bought the top on this got royally screwed. I bought near the bottom of the day and got stopped out, but made another trade later to trim some of the loss. This trade was probably the most frustrating as I watched the 2yr note make a new LOD at 9:21AM, while the EURO just sat and did nothing for me. I sat in this loser trade down about $150-$250 for over 2 hours. It sucked, but it panned out. The Euro will undoubtedly bounce to 1.558 now that I exited my long. I should have probably traded E7 or made a forex trade instead of a trade on the Euro future contract to lower the P/L swing and my emotion involved in the trade.

ZF versus YM. I got some decent scalps on both of these trading them in an inverse correlated fashion.

At least I'm positive on the day. The Euro is creeping back above where I sold out as I type, but I could care less at this point, as I'm going to the GYM to release some of this negative tension. Believe it or not most of my profits came from long scalps on Gold and Crude oil.

US dollar rallies, Crude drops, and the stock market rallies

The August Front month Crude Oil Contract expires today. Oil is down again. I'm expecting a bounce during this short term down trend.

The Euro tanked hard, taking with it Gold and Crude oil.
Bond Yields rose sharply today on a bad auction of the 20yr TIPS. With Bond Yields on the rise, the stock market filled its morning gap.
From Reuters-NEW YORK, July 22 - U.S. Treasury debt prices extended losses on Tuesday after a $6 billion auction of reopened 20-year Treasury Inflation Protected Securities garnered soft demand, traders said.The nominal 30-year Treasury bond fell one full point in price for a yield of 4.68 percent , versus 4.62 percent late on Monday.
13 contracts traded. I did terrible today. I made the mistake of trying to trade crude oil. I only have enough margin right now to trade 1 contract, so I had all my capital tied up in a bad trade while the market rallied. Of course I sold my crude oil $1,000 too soon for a second day in a row. Overall, I'm going to do my best to avoid crude oil. My niche is stock futures, I have no edge trading crude oil. I came close to losing today, but I stuck with it and turned a small profit.
With the action in bonds and with the current Fed speak on interest rates, I'm expecting an interest rate hike at the next FOMC meeting.

Time to put on the Bear suit

I'm looking at my daily charts and I'm seeing setups for short trades.






I think gold will bounce, which partly makes me bullish on Crude Oil making new record highs in the coming months. Arghh!

What's with Gold and the Euro?

Well, not long after Gold hit $1000 an ounce we sold off hard. We are now trading around $850 and the US dollar has bounced well off its lows. I'm going to be watching for a possible bounce in Gold and the Euro in the near future.

Euro

Gold

FSLR earnings are Faded

FSLR- The gap up- fade trade. FSLR had earnings this morning. Wish I faded this gap.
Gold long scalps (I partly based my long scalp on oil getting support)

My first trade on Crude was bad. My second scalp was decent.
Airlines seem to move the most right after the open.
Finally got a good signal on AAPL, I should have held half for my buy signal.

Holy $HIT GOLD....DROPPED!

Gold dropped 70 bucks today. It that the biggest move ever for gold?
I just gotta say, holy crap to that. The dow is up over 400pts yesterday and now down 300pts today. I told you that this market was going to go nuts the next 12 trading days. Just waiting for next Tuesday. Is it time to buy gold? Is this a massive shakeout of the longs, or is this the top?
I think the Euro is headed back up, and along with it gold is too. And I think the stock market is going down. I could be wrong on both. Time will tell.

Gold to $1000 by weeks end?

We're at $982 as I type right now on Monday morning. With the weakness in the US dollar and the momentum driving commodities up, you would expect to see gold go to $1000 very soon.

Major Themes continue

Gold and Oil continue up and weakness in Financials continue.



I think the trend in Gold will continue until the Fed reverses there position on interest rates. Maybe I'm missing something here, but I see inflation as a bigger problem right now than trying to maintain growth in the US by cutting interest rates. Bernanke said he cut rates to help restore confidence in the financial institutions. On January 21st, I probably would have done the same. However, I think the belief that the Fed is going to keep cutting rates and keep them down isn't going to play out for very long. Bernanke and company are smart guys, and the blame shouldn't be put on them. I agree with the senators complimenting Bernanke on being sincere in his statements and being straightforward in his remarks. It's interesting to note that one of the senators asked Bernanke today if he thought that reducing interest rates would help the economy and housing market. Mortgage rates are still high even though short term bond yields have come down. The idea of cutting interest rates to in effect lower mortgage rates and help boost buying in homes hasn't worked thus far.

While short term bond yields are lower, the long term bond yields haven't come down very far in comparison. It has been noted that any further interest rate cuts would in effect put the real rate negative when adjusted for the the current inflation rate. Bernanke is hoping inflation will stabilize and come down in the future and I think that as soon as inflation indicators (Oil,commodities) come down that the Fed may increase interest rates again, which would hopefully help the US dollar. The next FOMC meeting is going to be huge IMO, and I think there is potential for a sharp reversal in all markets shortly there after on what further actions the Fed takes after the next meeting.

5yr vs 30yr

Commodity inflation, Dollar new all time LOWS

Todays top performing sectors. (Trailer park homes and Toys & Hobbies? I guess the funds think since everyone is foreclosing that we are all going to have to move into trailer parks and buy manufactured homes, also since no one is buying new cars, money is flowing into auto part stores, because people will have to fix there own beaten up cars )


Great, now Yahoo finance is adding momentum to commodities.



With the US dollar at ALL TIME LOWS, Gold went straight up from open to close today. (20+pts)

THE US Dollar, now worth 66 cents in Europe. Good Heavens.......



Closing position (Bullish on ZF and ES, bearish on ZB and ER2 as usual)



Morning position


POT,,,,If you shorted this stock you don't have a POT to Pee in.


DBA, new Highs, Ride the Ags to $50


EWZ getting ready to make new highs. Brazil says, What bear market ?


India's market looks F$%Ked