Longer Term Investment Outlook

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This video contains charts and some further details regarding stocks and bonds specifically.  The outlook and advice is pretty simple.  Sell all bonds and move to cash.  Understand that after the 2008 stock market decline, big money has flowed to bonds and that is the class of assets that your investment adviser or financial planner will currently feel safe recommending and be able to show you that has positive returns over the last few years.  But as investors, we have to be savvy and see the risk or potential BEFORE it actually happens, and be willing to act with little to no confirmation from FACT that we have chosen correctly.  THIS IS ONE OF THOSE TIMES.

Additionally the smart money commercial stock futures traders took a big jump in selling this according to the CoT data, and I think we will see that they sold even more heavily through this past week's jobs/unemployment data.  My suggestion is again to sell stocks and move to cash.  The pattern and real money data are becoming increasingly clear that a major market movement is about to take place to the downside.  If you need some initial PROOF, then I suggest that a daily close below 1310 on the S&P 500 be your signal that this current bull market is over, and we will see a rapid price decline.

Again this is investment time frame advice.  So understand that while I think that we truly are very close to seeing a major market shift to the downside and unwinding of some of the "bubble" activity in stocks and bonds, it may be 2-4 years for things to really play before possibly re-investing in a major way.

Cancel the TBT Trade Order For Now

Earlier today I had posted a limit order to buy TBT, an inverse Treasury Bond ETF. This was based off of analysis posted previously. However, today's session gives me pause enough to pull the orders for now, but no significant change in the larger outlook.

The chart above shows that the yield on the 30 year Treasury Bond broke above the neck line of the reverse head and shoulders pattern. However, today a nice looking doji formed and the daily RSI is oversold. Signals are mixed in that the ADX/DMI just signaled a new downtrend as the ADX rose above 20. So at this point I am expecting a bounce in bond prices before any potential trade.

There is also more to this whole issue that I haven't got into. But in brief, bonds prices have moved inversely to stock prices for the last few years. However, in recent months that correlation has started to wane significantly. At this point though, there is still a general inverse movement. On a longer-term basis, I think it is most likely for both stocks and bonds to turn down. That would probably confound many people. Also, it would likely be interpreted initially that the market fears inflation due to the demand for higher yields. But a study of the scarce historic deflationary periods would suggest that it is more likely fear of default of the underlying debt. In this case most likely foreign governments beginning to unload long term US bonds onto the open market while prices are still modestly high.

If that were to occur I can only presume it will build into a selling panic which will spike yields (hammer down bond prices) substantially. For those looking for income investing, there may be a good opportunity to purchase bonds at higher yields, but of course you need to make your own judgement on the prospects of our government defaulting on its debt given the mounting deficits and all that.

So for now the bond market is the main one I am looking at for a possible trade.