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Bond Bear Market Forecasts May Be Premature

As long as unemployment remains high and machines are replacing humans even in the service sector (read this piece by Josh Brown ) the probability is still high that the spike in yields is just due to the anti-correlation between stocks and bonds and it does not mark the start of a bear bond market. At this point, proper risk and money management is more important than ever.


It may be seen from the daily chart that the 10-Year Note yield is still well below the upper trendline that terminates just below 2%. Thus, at this point movement is still sideways and below levels reached last September that marked a reversal in direction.

Risk and money management is the key here. It is possible that this is the start of a bear market in bonds but how probable is it? Possible Isn’t Probable in the Lottery or Investing, by Rick Ferri, is a must read.  A solution to this problem was found by market wizards in the past. It involves making a small initial bet, usually less that 2% of available investment capital and then adding to it during dips in a strong uptrend. I am not saying this is an easy strategy. Actually it is very hard and this is one reason those who came up with it were called wizards. The FED may still be in control of the game and may target again a yield of 1.50% for the 10-Year Note. Do you want to bet all of your investment capital that the FED will not succeed?  

Disclosure: no relevant positions at the time of this post

Charting program: Amibroker (Charts created with AmiBroker – advanced charting and technical analysis software.”)


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