Bonds and bonds funds (TLT) should see some weakness in the next while.
As spoken earlier using a put calendar on these. The policy of the feds to pump money into the credit problems has led to yet another bubble. Commodities! So while this commodity bubble game has yet to play out, we should (as always) look to the future. The feds will have no choice but to start a campaign to raise interest rates. The only question is at what point.
The smart money is already taking positions to short bonds. Yesterday was a good observation. While the gig may go for a few more weeks, the feds next meeting could very well be the last rate drop for a long time.
Normally to short something via options, we take the straight put route. This is because typically things implode rather quickly. However, we should see a steady decline for a few years in the bond market as the feds try to gain control over inflation.
Right now the mind set of the feds to curtail the housing problem will at some point turn to controlling inflation.
Do not buy into the rhetoric or the spin, watch for actions such as bond spreads etc. More likely the feds will deny as usual any shenanigans until it is obvious to the general public what is transpiring.
My take on trading this is to wait for the institutions to get on board. If you want to play with the smart money, there will be long spans of no movement. This is not bad for accumulating, but not so good for options trading.
1 comment:
I believe the FED meeting at the end of the month coincides with a great support line for the market. It makes me believe that there will be some great dissapointment on Wall Street due to rate cuts, or lack of.
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