The Chart du Jour

Bonds - Moving Averages Roll

November 6, 2000

By, Barclay T. Leib

We perused a plethora of charts over the weekend trying to answer the question: Can the Fibonacci rhythm of individual charts or sectors help us predict the outcome of the U.S. presidential election? We thought that if defense stocks as a group looked bullishly poised, or healthcare stocks bearishly poised, that maybe we could conclude something about the election in advance. Although we did spy several individual equity charts of potential interest (Microsoft for example has yet to reach our Fibonacci target toward $43 -- potentially a sign Gore somehow squeaks in) after much work, we could not discern any systematic trends across stocks signficant enough to delve into here.

Suffice it to say, we remain of the opinion that whichever candidate wins, that candidate will likely regret his victory in a few years time. The bull market of yesteryear simply ended on a momentum basis last December, and neither of these chaps is likely to bring it back. Because they will be unable to do so, whomever is elected -- with time -- will be blamed and become unpopular.

What we do continue to see, and as commented on before last Friday's negatively received government economic numbers, is a definite negative look and feel to the U.S. T-bond contract. This has become even worse this Monday morning as the T-Bond futures break down through the 40-day and 100-day moving averages. Something is just beginning here, and it looks ugly.


Chart courtesy of FutureSource.com

Last heard, John Meriwether of Long Term Capital infamy is back in business with a new $400 million hedge fund. Last heard as well, his biggest position is now long 30-year bonds and short 10-year bonds -- playing the U.S. debt retirement game. What Meriwether consistently forgets however is that financial markets are not just driven by politicians and central bankers, but by bigger cyclical forces. Inflation is turning higher, as are U.S. interest rates. Meriwether's trade is flawed yet again. If there is one initial fallout of this election, a lower long bond market is on the agenda.

We are beginning more work for subscribers on both the T-Bond and the U.S. dollar at the moment. Stay tuned for more definitive price and time objectives here.

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