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The
long-term T bond could be a great short even if it remains within its secular
uptrend (interest rates in a secular downtrend) because as the big picture monthly
chart of the ‘Continuum’ shows, there is a long way up to the 100
month EMA where another theoretical red arrow would be painted on long-term
interest rates.
 
Dialing
in to a weekly view of the iShares long-term T bond
ETF, MACD and RSI have been sporting ongoing negative divergence for a year
now.
TLT
is in a weekly downtrend by AROON, but it is in a daily uptrend. We have have a projected 2012 target of
just above 130 based on a pattern we have been following by daily charts.
Depending
on next week’s FOMC and the likelihood that the manipulators of the macro economic environment will choose
‘inflation’ as the easy fix to unfixable structural problems, the
bond could get its final bump up to target.
By
stating they will outright buy a hopelessly indebted nation’s debt
obligations, without the sanitizing effects of Operation Twist, the herd
could knee jerk into the bond amid the Fiscal Cliff uproar, get nice and
comfy and then wait to be sheared as the inflationary effects (which would
erode any perceived ‘value’ of these bonds) of such actions
become apparent in 2013.
This
is a valid setup that would go against many people’s expectations.
After all, gold is forecasting no inflation, right? Yeh,
right. The other side of this trade is that where ever gold bottoms, a chance
to acquire monetary insurance would once again be at hand for people who need
such insurance. Want to bet the herd will once again choose not to own this
insurance if gold visits 1625 again?
That
is a level that has been on radar all along. Here, let’s update the
weekly charts.
Gold
is clinging to the critical 1690 parameter. If it should lose this level and
get the majority of technicians wrangling even more obsessively, it is going
to the green shaded support zone. It’s only 70 bucks lower after all.
Gold could do that with one hand tied behind its back.
Meanwhile,
gold is at the lower limit of the Ascending Triangle in Euros. The Euro is
getting over bought by a global herd that, if it could just step outside of
itself and observe itself objectively, would appear quite absurd.
Wasn’t it just last summer that Europe was ending? You see the hilarity
of course.
But
technicals are technicals
and gold would preferably stabilize in Euros now at the lower triangle limit.
Of even more importance is the purple weekly EMA 60, which has supported
Au-Euro on previous breakdowns below the EMA 40.
This
was going to be a quick post on the long bond and inflation. Then it
expanded, I guess because I find it really interesting to see the role gold
is playing in the run up to FOMC; the same FOMC that has stated that Op/Twist
is ending this month, which would leave any future inflationary operations unsanitized. You see?
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