Will Government Intervention Help?
The bond market is still suffering from liquidity
problems, but sold off again today, weary that the Treasury
Department could follow up on Thursday’s surprise sale of 10-year notes by
supplying even greater numbers of fixed-income securities in an effort to
get the bond market’s intricate system of loans and relationship-based
trading back on track.
The potential for inflation remains a problem for a
continuation of the rally in bonds and the government will likely have to
issue even more bonds to pay for military strikes, business (airlines)
bailouts, and enhanced national security.
Traders who are not looking for a fundamental reason
may want to consider the argument that both T-bonds
(
USZ1 |
Quote |
Chart |
News |
PowerRating) and
10-year notes
(
TYZ1 |
Quote |
Chart |
News |
PowerRating) have completed the fifth wave in an Elliott
five-wave pattern and that both gapped down from highs on wide-ranging bars.
T-bonds settled down 27/32 at 105 30/32 and the 10s sank 16/32 to 109 0/32.
The United Kingdom’s active participation in the
attacks on Afghanistan is causing something of a flight out of
British pounds and sent it on its biggest tumble in a month. Pounds
sterling had been a safe haven buy following the attacks. But
British Special Forces are reported to be working closely with US special
forces, and this is seen as making the UK more of a target to retaliatory
strikes.
Also, comments made by a European Union financial
official is modifying perceptions about the strength of the the pound and
euro vis-Ã -vis the dollar. Too weak of a dollar would make economic
recovery in the US more difficult, which in turn, would slow global economic
recovery.
Looking at the recent highs in the December
British pound
(
BPZ1 |
Quote |
Chart |
News |
PowerRating), you will notice that it left a pattern similar
to a Turtle Soup Plus One Sell and closed .0214 lower at 1.4534.
Natural gas
(
NGX1 |
Quote |
Chart |
News |
PowerRating)
had its biggest run in a few months and closed up .118 at 2.338 as traders
shed short positions on colder weather.
Metals gave back gains as the US continued military
strikes in Western Asia. This can be seen in at least two ways. One, after
buying the rumor of strikes, traders are selling the news of military
action. Or two, safe haven metals are selling off because they did not gain
additional upside once strikes commenced. However, both still remain in
bullish flag patterns. December gold
(
GCZ1 |
Quote |
Chart |
News |
PowerRating) fell 3.7 to 289.7
and
silver
(
SIZ1 |
Quote |
Chart |
News |
PowerRating) sank 12.0 to 455.0.