Posted by: stockscooter | May 15, 2012

Treasuries Look Like Gold

Treasury Inflation Protected Securities, known as TIPS, are trading with a similar intensity as gold did over the past few years.  Is anybody talking about the bubble going on in this market?  I surely don’t hear about it.  This will not end well when it gives up the ghost.  Here’s what a bull tear looks like.

The yellow lines show divergence.  Prices going up and the strength indicator going down, with lower highs.  Usually prices resolve downward, however, as of last week, the divergence line has been broken upward.  The blue circles show the break and the upward turn on my first-to-turn proprietary indicator.  That’s a dangerous market to short.  So, longs should stay long, with a trailing stop.  Trying to buy it at this stage could have a whipsaw effect at any time.  It seriously could drop out of the sky at any time or take-off like a missile.  This is not my idea of low risk investment, yet those buying them are being deluded to think it is.  These have expanded their value by much greater rates of return than CPI alone.  Therefore premiums that are exaggerating these returns will devalue at some point, to a zero premium.  Please be careful not to get caught in this game.  The risks are too great.  As always, do your own due diligence.

 

 

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