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Our bond charts still too young

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Past commentary regarding "Beetles Balanced" asset allocation portfolio along with some of John Seckinger's comments in the market monitor regarding Treasury bonds, higher grade corporate and well as junk bonds has subscribers wondering why we don't show the technicals of these different bond's prices on our intra-day chart.

One reason right now is that the various "Ishare" bonds that the "Beetle's Balanced" asset allocation portfolio was benchmarked from are rather "young" in their existence and difficult to make any type of technical analysis from at this point.

However, we have made some comments regarding the used of corporate bonds (higher grade versus Treasuries, along with junk bonds versus higher grade corporates) to get a feel for the MARKET'S perception of risk.

While I talk about Treasury YIELDS on a rather frequent basis, Treasuries are to be considered "less risky" than corporates. As such, traders and investors may be monitoring this asset class and the frequently discussed 5, 10 and 30-year YIELDS, but also the corporate bond markets.

When a stock investor understands that stocks are the "last" group of investors that would receive any type of relief under a company's potential filing for bankruptcy, then next in line would be a company's bond holders.

While it is true that various traunches of a corporation's bonds would carry various senior versus subordinated debt classification, for the most part, we're using the Goldman Sachs $ Invest Ishares (AMEX:LQD) $105.40 _0.19% as a way to put together a basket of higher grade (NOT higher YIELD junk bonds) to get a little different reading on how the MARKET perceives these bonds and RISK for higher grade corporate debt.

With that said, corporate bonds in this class should do well (price rise) on the thought of this basket of bond's underlying company's debt and business prospects. Either in unison with stocks, or potentially ahead of a turn in stocks prices.

As time progresses and we get more historical data on the corporate bond classification from the LQD, then we can begin making some various "assumptions" as to what the MARKET is thinking. For now, all we can really do is simply monitor this asset class' near-term performance.

Beetle's Balance Fund - Benchmarked from July 31st GDP data

On Thursday, we'll be getting the FINAL GDP data for the second quarter. It was in late July that the PRELIMINARY GDP data showed a still growing economic backdrop, but perhaps not growing as "fast" as some had thought.

However, since that "benchmark" of July 31, traders are perhaps noting that both asset classes of stocks and bonds show gains as it relates to the "Beetle's Benchmark."

Interesting too, as it relates to the above commentary, is how similar the current P/L % (Profit/Loss % since July 31) is for the LQD and to "subtotal" for our stock assets as depicted by the Dow Diamonds (DIA), S&P Dep. Receipts (SPY) and NASDAQ-100 Trust (QQQ).

In essence, it looks to me like the MARKET has made some adjustments from the PRELIMINARY GDP data of July 31st, and perhaps looks for the PRELIMINARY GDP data to be revised slightly higher Thursday morning.

Jeff Bailey
Senior Market Technician
Option Investor

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