Friday, the 30-year Treasury Bond finished the week and month testing my upper daily boundary high projection at 174-17. It took the last two weeks for the 10-year Treasury Note to muster the necessary momentum to snap back and test my long standing resistance at 132-29/133-00.
Global investors dumped equities in July and raised bond allocations after Britain's vote to leave the European Union and subsequent signs of damage to economic growth prompted a dash toward fixed income.
Last week the 30-year Treasury Bond ground higher and finished the week posting another new all-time contract high; Friday the 10-year remained range bound and tested its weekly low and rebounded to finish the week near its upper weekly high.
U.S. government bond yields, the benchmark for global borrowing costs, hit an all-time low today and the yen jumped as weak Chinese data and Brexit worries triggered a fresh scramble for the safest and most liquid assets.
This “distortion” between “risk” and “return” has created a “bubble” effect in all global equity classes. I informed my subscribers to exit the SPX on Nov. 25, 2014 and to enter cash. Their equity risk exposure was reduced to zero. Momentum oscillators are now extremely overbought and are very clearly trending bearish. I wait for confirmation before entering any new long SDS and long VXX positions.