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The magic number you need for shorting U.S. government debt
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Monday, April 13, 2009
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By Tom Dyson in DailyWealth:

When the path of least resistance is down, the market tends to shrug off good news and react very strongly to bad news. When the path of least resistance is up, the market soars on good news and ignores any negative stories.

When both of these signals line up, you are trading along the path of least resistance and you have a high-probability trade.

Let's take the long Treasury bond as an example. On March 18, Fed Chairman Bernanke announced he would use the Fed's money printer to buy $300 billion of Treasury bonds. This should have been wonderful news for prices of Treasury bonds... and for a few days it was.

But in the last month, prices have shrugged off this "wonderful" news and fallen back down. Our sentiment indicator is clearly showing the path of least resistance is down.

Now we're just waiting for the price action to "break down." Right now, the long bond price is $125.92. To confirm the path of least resistance is down, prices need to fall below...

Read full article...

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Topics: Bonds | Tom Dyson | Cruxallaneous
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