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This Is Your Final Warning

By Jeff Clark
Friday, November 5, 2010

Get out of the bond market… NOW!
 
Interest rates are breaking out.
 
In the past three weeks the 30-year Treasury yield has risen from 3.7% to over 4.6%. Here’s an updated chart…
 
 
It may not seem like much, but this tiny 0.9% increase indicates an important change in the long-term trend. We now have a two-month-long series of higher highs and higher lows. In other words, the Federal Reserve's attempts to manipulate the long-term interest rate market are failing.
 
The new quantitative easing program is focused on buying bonds in the six-to-10-year maturity range. There's not enough money flowing into the 20- to 30-year long-term bond market to keep up with the ever-increasing supply. Bond prices are falling, and interest rates are rising.
 
We saw this trend kick off two weeks ago when rates spiked above 3.9%. Since then, long-term rates have mostly waffled back and forth. But the spike higher on Wednesday afternoon, following the Fed's announcement of the new quantitative easing program, should leave no doubt the trend has changed for long-term interest rates.
 
Bond prices have already fallen 3% in the past two weeks. And there are bigger losses ahead.
 
Once rates break above resistance at 4.1%, it's a straight shot higher to 4.3%. Above that level, however, there's nothing to hold back a rise to 4.8%. That's enough to crush the bond market and inflict serious pain on anyone who bought long-term bonds thinking the Fed was on their side.
 
Get out now while you still have a chance.
 
Best regards and good trading,
 
Jeff Clark




Further Reading:

Jeff forecast the bond market's demise months ago. If you ignored his warnings then, it's time to start listening. Revisit them here: The Bond-Market Rally Is Going to End Badly.
 
"Bond investors are sailing into the perfect storm," Jeff said last week. Interest rates are rising and a 30-year bull market is ending. Read more here: If You Must Be Bullish on Something, Try This.

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Market Watch
Symbol Price
Change
52-Wk
S&P 500 1225.85 +0.4% +14.9%
Oil 37.65 +0.4% -7.7%
Gold 136.38 +0.3% +27.5%
Silver 26.20 +2.2% +53.0%
US-Dollar 75.91 -0.6% +0.2%
Euro 1.40 -1.3% -5.7%
Volatility 18.26 -1.4% -28.2%
Gold Stocks 549.91 +0.3% +27.0%
10-Year Yield 2.54 +2.4% -28.1%

World ETFs
Symbol Price
Change
52-Wk
USA 122.72 +0.4% +14.9%
Canada 30.01 +0.3% +20.4%
Russia 20.88 +0.5% +14.7%
India 40.83 +1.2% +37.2%
Israel 16.87 +0.3% +23.2%
Japan 10.34 +0.9% +6.8%
Singapore 14.31 +0.1% +32.4%
Taiwan 14.41 -0.1% +19.0%
S. Korea 57.44 -0.6% +29.9%
S. Africa 71.99 0.0% +34.7%
China 47.83 -0.1% +8.2%
Lat.America 54.53 -0.2% +17.8%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 126.09 -0.3% +3.6%
Big Pharma 65.82 -0.8% +5.1%
Internet 71.34 +1.0% +30.6%
Semis 15.24 +0.3% +33.6%
Utilities 32.05 0.0% +10.7%
Defense 18.60 +0.6% +16.0%
Nanotech 9.98 +1.5% +0.2%
Alt. Energy 10.49 +0.7% +5.2%
Water 18.12 +0.7% +11.0%
Insurance 16.44 +0.9% +22.0%
Biotech 20.38 -0.2% +25.2%
Retail 18.71 +1.0% +24.9%
Software 24.44 +0.3% +25.7%
Big Tech 53.67 +0.0% +26.7%
Construction 12.77 +1.4% +9.0%
Media 13.41 +0.5% +24.9%
Consumer Svcs 66.21 +0.3% +26.6%
Financials 56.36 +1.8% +10.7%
Health Care 64.94 -0.4% +9.3%
Industrials 62.00 +0.5% +22.7%
Basic Mat 72.04 +0.8% +29.2%
Real Estate 57.62 +1.0% +39.6%
Transportation 88.92 +0.1% +30.5%
Telecom 22.54 -0.3% +28.0%