Putting the pieces together...

Another Look At Bonds

Most people I know in cyberspace love gold or stocks. I do too. But, being retired, I'm still liking bonds after a 24 year bull market. Many players have gone to extinction shorting bonds for decades now. The shorts will be correct eventually, but the bond folk have heard every anti-bond story imaginable, so they are staying the course.

Paul Krugman published his first deflation book in 1999 (remember 1998??). Gary Schilling and Lacey Hunt are very different, but they too have been pro-bond ever since.

I gave up on intermediate to long term bond funds a few years ago when they mostly went to the short term end where I already had a position. But the possibility of a parabola in long bonds if 3% went to 1%, as in Asia and Europe, was too enticing, so I've been short term trading the long side in 25-30 year Treasury strips with EDV.

VTI Follow-up

The Vanguard Total Market ETF VTI has remained close to but not through the upper trend line of the past nine months. My 2.cs, combining both CBOE put/call ratio and VXO, is near where it was before the decline of SPX in early March.

Brazil

I'm very slowly scaling into Petrobras PBR. With $2 commissions this is feasible. EWZ will be a buy some day.

Sentiment Divergence

My favorite way of looking at the CBOE SPX Put/Call options daily ratio is to combine it with VIX each day as I have done since 1996 as the 2CS. I can't show it in chart form as it is calculated manually and stored on paper with pen. But I have inverted both P/C (1/P/C) and VIX (SVXY) to give a reasonable picture of what's happening. You'll see on the chart what I call sentiment divergence.

It is why many sentiment observers get confused, or dismiss the indicators as useless, near important long term tops. Bullish sentiment rises together with stock prices for a long, long time in bull markets, but it peaks out in mature to nearly "senile" bull markets as smart traders/investors begin to lock in some profits. This is where we've been for about 3-6 months already.

When we actually do go down is what we must learn or guess, but we do know from this divergence that we are late in the bull game, "most likely". Then too, bear markets vary in severity and length, and this tells us nothing about that eventuality.
 
 

OOOPS the BOND

The bond has fallen. Can it get back up?

I had not been watching the weekly chart of the US Treasury long bond, and I missed the fork or preceding range bisect target. But I was lucky enough to have exited all my EDV (Vanguard 25 year T Bond strips) within a few ticks of the high. This was purely a trader's  momentum reflex profit grab. I have been buying EDV back, and am under water right now. I expect a bounce up to 152-152.60 in $USB, and then we'll see. Unless gold and oil go up significantly and the dollar and stocks down, it's hard to believe the 34 year bond bull market is finally over.

As for generic US stock equities, my VTI analysis of last week has played well, and I covered my hedge position in TVIX, the double short ETF of short term VIX. Considering the micro-plunge in most indexes, VIX didn't do very much, so I'm inclined to expect a bounce up. These very long expanding or rounding tops are emotionally exhausting, and it's best to be philosophical and not too committed either way until some confirmation of a breakout upward or a final breakdown.

Sentiment "divergence" is shown by the inverted VIX ETF, SVXY, with VTI closes in the green line. This phenomenon is rarely mentioned and is contrary to "contrarian" thinking that bullish sentiment is greatest at THE top. Well it usually isn't.

My five fairly conservative stock mutual funds are BERIX, FPACX, VMNVX, VWIAX, and HSGFX. Each of these hedges stock risk in a different manner. They are all still in my "backpack", although VMNVX is a sell candidate on a good bounce since I have no history on it in a bear market.