Bond Crash?
In the Era of Negative Rates, it is hard to imagine a bond market crash; a bond market correction, yes, but a crash will not occur anytime soon. Yes, the market will crash one day, but you could be long gone by that day. Mass psychology teaches us to focus on what the masses are doing and not on what might or might not happen. We used Crowd Psychology to develop the following analysis, sent out to our paid subscribers in February 2016. Hence, all sharp corrections need to be viewed as buying opportunities.
The trend is still up, but bonds are still trading in the overbought ranges; this can be seen by looking at the MACDs and RSI. There is a relatively decent layer of support at 162, but a weekly close below this level will most certainly lead to a test of the 158-159 ranges. At that point, individuals interested in going long bonds could deploy some funds into a bond-based ETF. Market Update Feb 29, 2016
Commit half of your funds if the pullback is more substantial than expected. This is a very mature bull with significant volatility levels, so a bit of prudence is warranted.
The bond bull market, while mature, is still quite strong, and bonds could drop below 154 without affecting the bullish outlook. We are not stating that they will drop to 154, but just illustrating that even such a strong move down would not invalidate the bullish outlook. A move to or below 154 would make bonds an excellent buy, and at that point, traders could deploy the 2nd half of their funds into a Bond related ETF. Market Update Feb 29, 2016
Some people purposely use scare tactics to get better prices but rarely act on the advice they are dishing out. The bond market did not crash, nor did the market. The market corrected just like the bond market will, but a crash is not in the works. Don’t listen to naysayers; they have nothing better to do than chant songs of doom and gloom.
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