Buy Bonds for a Trade
by Charles Meek
November 11/05
Dow Jones Industrial Average 10,593
Value Line Arithmetic Index 1,959
30-Year Treasury Index 4.81%
Gold 1/10 Ounce $46.58
The Big Picture for Stocks
The 4-year cycle is negative for stocks into 2006.
Technical Trendicator (1-4 month trend):
Stock Prices Down
Bond Prices Up
Gold Price Down
Our Technical Trendicator for bonds has turned up. I am not as confident about the buy signal as I might be because the sentiment has not gotten as bearish as it might for a good buy signal. But we are oversold and the trend indicators are turning up.
It could well be that given the new declining trend in oil, and the recent indicated trend in housing (Toll Brothers lowering of guidance), that the Fed could stop its upward rate pressure on interest rates.
We use the bond ETF (symbol TLT) as the benchmark for bond prices. The previous signal was a sell at 92.96 back in May. It is at 88.71 as I write this. So the model has kept us out during the decline in prices over the last several months. Note our track record in the accompanying table.
If this trade is going to work, bonds should hold near the current price.
Put a stop on TLT at 88.12.
DATE |
SIGNAL |
TLT INDEX 20+ Year T-Bonds |
% PROFIT ON SALE |
TECHNICAL TRENDICATOR CUMULATIVE % RETURN |
BUY/HOLD CUMULATIVE % RETURN |
CUMULATIVE ADVANTAGE OF TECHNICAL TRENDICATOR |
PER ANNUM ADVANTAGE OF TECHNICAL TRENDICATOR |
2/21/2003 |
BUY |
85.68 |
|
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3/14/2003 |
SELL |
89.96 |
5.00 |
5.00 |
5.00 |
|
|
4/18/2003 |
BUY |
87.80 |
|
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6/19/2003 |
SELL |
94.10 |
7.18 |
12.53 |
9.83 |
2.71 |
8.3% |
8/21/2003 |
BUY |
83.00 |
|
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3/26/2004 |
SELL |
89.05 |
7.29 |
20.74 |
3.93 |
16.80 |
17.9% |
5/20/2004 |
BUY |
82.07 |
|
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9/4/2004 |
SELL |
86.24 |
5.08 |
26.87 |
0.65 |
26.22 |
25.3% |
4/1/2005 |
BUY |
88.73 |
|
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5/17/2005 |
SELL |
92.96 |
4.77 |
32.92 |
8.50 |
24.42 |
24.6% |
11/9/2005 |
BUY |
88.72 |
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Notes: The Technical Trendicator is a 1 to 4 month market timing model, which in this case is applied to the 30-year Treasury bond. We use the 20+ Year Maturity Exchange Traded Fund (symbol TLT) as the benchmark. Past results do not guarantee future results. |
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Charles Meek
MeekMarketModels.com
Mr. Meek is a Registered Investment Advisor. He is the editor of MeekMarketModels.com and manages Persimmon Capital Partners, L.P. a Texas hedge fund.
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Market Models, Inc.