Posted by: stockscooter | August 5, 2012

Investment TIP

Nobody is saying it, because the entire yield curve looks like rates could go lower and prices higher, however I’ll be the first to call the top for the Treasury Inflation Protected Securities Market.  Why?  It seems that an ending 5th wave diagonal is about finished.  Now, I’m not stating that prices will crash and yields will sky rocket, never to see these levels ever again.  It’s actually more likely to see prices trade in a new sideways range – A range that may be bigger than recent movements, during this past 4 year bull market.  I believe we will see volatility break-out in this market, as investors who think their returns are guaranteed, will come to the realization that the guaranteed Treasury market will take away as much as 20% of their principle, in the near future.  These losses will be devastating to these clients who may have been sold these with high pressure sales tactics.  This often occurs when clients fear the markets and want guarantees.  That’s when sales people take advantage and sell the client on a “line” about guaranteed bonds.  I expect the most down-side in the fourth quarter.

You can see the triangle that I have highlighted on the chart.  The triangle could take more time to resolve, but will run-out before year’s end.  A complete 5 wave structure can be counted here, however, they are also known for extending.  Let’s watch for a break of the lower trend line, as it appears to be entering an exhaustion phase.

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