Playing with fire. Or of human bonds.

Posted on Dec 29, 2008 by in Letters

We remarked that the bond chart got our short glands hyperventilating.  We shorted the bonds but didn't really give a good accounting of the analysis.  Here is a chart with the analysis.  Now there is something going on here that the intelligent reader should consider.  (We consider all our readers intelligent readers. After all you could be off listening to the analyst (?) who predicted Dow 16,000.)  That is the nature of risk.  Risk inverts at major turning points.  In other words after a panic sell off the risk has been drained from the market.  Wykoff said that he often looked for the point of maximum danger to buy.  In these cases the stops are obvious if you are wrong.  In this case of the bonds the chart is clear, the curve is parabolic and there is a gap which may well be an exhaustion gap.  Now, you can be wrong.  It can go higher, just at a panic sell off can be followed by another panic sell off.  But your stop should take you out in that case.

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