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If they're going to sell bonds, now's a good time

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The point and figure chart of the 30-year YIELD might indicate that we are currently at a critical point where we might expect institutional bond traders to perhaps be selling the 30-year treasury. What better place to sell a bond? Subscribers that are familiar with point and figure charts understand that the bullish support for YIELD is actually the bearish resistance trend for price. The 30-year bond has had a nice rally in price in recent weeks and now is as good of a time to lock in profits and sell this bond if they believe that the economy will be strengthening in the future.

30-year YIELD chart - 0.25 scale

I'd consider a trade at 5.55% YIELD on the 30-year a negative for stocks. Today, the 30-year YIELD did manage to trade the 5.575% level and that has the point/figure chart adding another "O" on its chart. If YIELDS are going to turn around, now might be the opportune time for such an event. How coincidental is it that the YIELD on this bond in testing upward trend just ahead of the Fed meeting? I don't think it is a coincidence at all. I'd expect Tuesday and Wednesday's Fed meeting to have a major impact on where bond YIELDs head from here. Equity bulls want to see YIELDs rise for hint that market participants think the economy will begin growing and that money no longer needs to sit in the safety of government bonds.

Jeff Bailey


The markets remain paralyzed ahead of Wednesday's Fed meeting, but the Dow is seeing some selling, down 80 points.

Dow Jones Industrial Daily Chart

That places the Dow back below the 200-day moving average, and below the lower end of the range it was trading in last week, but still above an area of support between 10,500 and 10,450. That level should continue hold until we get some guidance from the Fed. That is unless we get some more upgrades/downgrades. On the upgrade side, Goldman Sachs suggested having a Coke and a smile, an upgraded the stock with a price target of $50. The news makes Coke (NYSE:KO) the Dow's top point gainer today, up $0.95. On the other hand, shares of Home Depot (NYSE:HD) are being pounded like the nails they sell, down $2.26, after a disparaging article in Barons questions the company's ability to post strong earnings in the second half of the year.

The Nasdaq Composite has inched its way into positive territory, led by Internet stocks and semiconductors. Biotechnology, down 4%, and software, down 0.84% are holding back any further advances, but the Nasdaq remains safely above 2000. Once stock that could be trying to make a move is Yahoo, which is up $1.55 and testing the 50-dma. After looking susceptible to breaking down, Apple Computer is also making a nice move, up $1.14 and advancing above some key resistance levels.

Jeff Bailey
Senior Market Technician

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