728x90 AdSpace

Latest News
January 23, 2017

How Bond Investors Were Fooled Twice

How Bond Investors Were Fooled Twice
The Commercials and Large Speculators are routinely on the opposite sides of trades

By Elliott Wave International

[Editor's Note: The text version of the story is below.]

*********
Most investors, including large groups of professional money managers, extrapolate financial trends into the future. So they're often completely caught off guard when a trend changes.

The history of financial markets is full of such instances.

Right now, let's focus on bonds. As you look at this chart from our July 11, 2016 Short Term Update, keep in mind that Large Speculators represent the trend followers who are usually caught off guard at important price junctures. Conversely, the Commercials routinely take the opposite side of the trade.


The sentiment backdrop for [30-year U.S T-bond prices] is strongly bearish for prices. We continue to point out the extremes that remain in place in the Commitment of Traders data (shown above). In overnight trading last night, prices nudged up to 177^11.0 and then reversed lower during the day session. A decline below 173^15.0 would indicate that prices have reversed their rising trend and a larger selloff is underway.

The high of 177^11.0 remained intact, and as you probably know, prices careened below 173^15.0 as a large selloff took bonds sharply lower and interest rates rose.

Fast forward five months.

Our Dec. 5, 2016 Short Term Update showed subscribers that the price and sentiment picture had changed:


Tonight's chart shows the weekly pattern in [30-year U.S. T-bond futures], which have made a low at 148^11.0 so far (Dec. 1). ... After reaching a 21-year record extreme in conjunction with the wave (5) July peak, both the Large Speculators and Commercials have completely reversed their positions. ... A countertrend rally is fast approaching.

Just 10 days later, on Dec. 15, 30-year U.S. Treasury bond prices declined to 147^04.0, and since then, the expected rally has started.

This Jan. 6, 2017 Short Term Update chart tells the story:


[U.S. 30-year T-bond futures] pushed to 153^09.0 early this morning, just shy of filling the open gap at 153^25.0 from November 28.

Investors should now be keeping a close watch on the evolving market action. We suggest focusing on the Elliott wave price pattern and time-tested sentiment measures.


Markets all around the world are at a critical juncture -- you must see this free report now.

This is the fifth year EWI has created our annual State of the Global Markets Report. And since many markets around the world are at a critical juncture, this may be the most-timely edition of the State of the Global Markets Report yet!
It comes right out of the pages of their paid publications. For a limited time, you can see this report at no cost.
Get your 21-page State of the Global Markets Report -- 2017 Edition now.

This article was syndicated by Elliott Wave International and was originally published under the headline How Bond Investors Were Fooled Twice. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

© EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle

  • Blogger Comments
  • Facebook Comments
Item Reviewed: How Bond Investors Were Fooled Twice Rating: 5 Reviewed By: EconMatters