Interest
rates, up or down?
A rather boring day for stocks yesterday as it had
one of the tightest trading ranges ever for a
post-options expiration week Monday. It could
be a sign of a tired market, but after what the
indices did last week, that can be expected.
Did you notice that oil is at a 9-month high and
back over $69 a barrel? Tension in the Middle
East has contributed to that action. When oil
is up you start thinking inflation again but
actually, the yield of the 90-day (13-week) Treasury
Bill has been dropping, even while longer-term notes
are rising. When this 90-Day T-Bill (currently near
4.5%) moves 10% below the Fed Funds Rate (currently
5.25%) the Fed is pressured to act. That
action would be a rate cut.
Take a look at how the 90-Day T-Bill (thinnest line)
and the Fed Funds Rate (thickest line) usually
move along the same path. The inverted yield
curve has now "normalized" as longer-term bond
yields have gone above the short-term, but the
90-Day T-Bill yield is now well below the 5.25% Fed
Funds Rate.
The next FOMC meeting is next week, the 27th and
28th of June. There is a chance we could see a
rate cut based on this data alone. This will
be a test for the new Fed Chairman Bernanke.
He hasn't been in this situation yet, but Greenspan
has pulled the trigger in this situation several times.
As you may have seen, I moved back to 100% F-fund
yesterday before the deadline, so today I am back in
the F-fund today. Yesterday I
had posted a chart of the current bond score which
is now in a position that in the past has given good
entry points into bonds. I think the above
chart confirms this.
Yesterday the bond market (F-fund) started in
negative territory and I thought we were getting a
nice dip to buy. But as Murphy's Law would
have it, by the end of the day, bonds were up and
the .02 cent gain in the F-fund seemed to be .01
above what I would have expected to see from a 0.07%
gain in the AGG. I think that could put us .01
in the hole for today.
So, again I will reiterate that I am very bullish
going out six months or longer. Short-term I
am looking for a chance to get in. We are
approaching the summer doldrums, pre-earnings
warnings, and I am watching the
TSP
Trader System for a buy confirmation.
Also, the
TSP Talk Sentiment
Survey
is on a buy this week but this week's reading was
actually just neutral. The reason it is in the
market is because of the prior week's buy signal.
Not to take anything away from the system because
that was the way the system was designed as it
seemed to work best that way.
The EbbChart System
remains in the I-fund today and Wednesday. Read more on the
ebbchart page.
As I mentioned, Trader Fred's
TSP
Trader System remains out of the market as his
data is indicating possible short-term trouble. Read
Fred's current commentary on the
system
page.
That's all I have for today. I am currently 100%
F fund. See you tomorrow!
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