US T-Bond - "A No Brainer To Sell" ?

 

                               "Yes, I can see the black swan."

Nassim Nicholas Taleb argued in his best-selling book “The Black Swan: The Impact of the Highly Improbable” that history is littered with rare events that can’t be predicted by trends. The fundamental analysts crowd loves his book to death because it helps to "explain" their incompetency in failing to read practically every major turns of the financial market. When their disgruntled investors (people who lost big money) complain, they can always point them to the direction of this good book - " Look, it is no fault of mine. How am I to know there is a black swan out there ?" And they carry on another happy day continuing to get stoned out of their brain on cracks.

Last week Taleb said “every single human being” should bet U.S. Treasury bonds will decline. He said :- "It’s “a no brainer” to sell short Treasuries ". Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow . “Every single human being should have that trade.”, " that the U.S. dollar will weaken against Asian and “commodity” currencies " and “deficits are like putting dynamite in the hands of children.” Taleb said in an interview with Bloomberg Television. “They can get out of control very quickly.” during the same conference.

But then I remember Taleb belongs to the same group of "experts" who sang "Everyone is short the dollar." recently.



Whenever I read about such a SURE THING, I always like to check them out from the charts. Well I beg to differ from his "no brainer" opinion. The weekly chart shows a very distinctive double bottoms formation with the MACD forming a higher troughs which my school call it a positive divergence. Whenever this happens, it is basically telling me that the sellers are faking their shorts or they are getting nervous about their positions. The MACD is now rising toward the zero signal line which I usually find it a more bullish sign than a positive crossover. The Stochastic has a positive crossover and it is running towards the 50's signal line which I would find it as a more comforting buy signal. Also notice that the rising Stochastic has already crossed up above the falling trendline which I would take as an initial buy signal.

But the whole picture is still fuzzy as the ADX still remain below the 20's , something that it has been doing since mid July last year. And this is being confirmed by a tightening Bollinger Band and the D+ and D- have been closely knitted together like a chucheongfun. There is no trend in this market yet. I would watch out for a closing above123.45 (as marked out by red colored line) as a powerful buy signal. If this trade is confirmed, I would say it can easily go to 131.50.



At the daily chart, the double bottoms is obvious and a positive divergence is also found at the MACD. But like the weekly chart, the ADX is not encouraging. It is flat at 20's. So all I can say at this stage is that the trend is smallish. With the MACD has already gone above its zero signal line and prices above the middle Bollinger Band, I am getting increasing bullish. In this kind of sideway market situation, I often find by drawing a horizontal line marking out the prior peak of the D+ or D- is a good way to confirm the beginning of a new trend (up or down) when they are breached. Here I have drawn a horizontal line marking the prior peak of the D+. Why D+ and not D- ? It is because both the daily and weekly chart are supporting for a possible bull rather than a bear. Since the ADX is flat and lowly, the Stochastic can be read as overbought now. The bull will have to wait for a new signal to emerge next.

As highlighted in the weekly chart, the ADX has been lying below the 20's since mid July last year until the beginning of this year. I often find such prolonged trendless state is usually a prelude of a major violent directional move in the market.

So now I am betting against all those talks of how bad is the US deficits and XXX excessive borrowings, I think the T-Bonds is showing great sign of a major bull run. And if I am right, I hope Taleb's fund can last through this year.