The past month in the financial markets has been about as "seesaw" as it can get.
But the action in the markets has been downright stable, compared to the variety of "explanations" each day from the mainstream experts.
Take, for example, the bond market stories on August 9. On that day, the Dow Jones Industrial Average fell more than 380 points in its second-worst session of 2007 – and, Treasury prices turned up.
According to the usual suspects, the one had everything to do with the other, as these news items from the time make plain:
- “Safe-haven Treasuries rally as US stocks tumble.” (AP)
- “Treasuries extended their climb amid continued stock market and credit jitters. Market participants are unlikely to go into this weekend short on Treasuries with everyone on edge for more bad sub-prime related news. (San Jose Mercury News)
- “Just look at stocks. IF equities can stabilize here, Treasuries have already done their job of a flight to quality safe haven.” (Reuters)
The irony is, anyone who “just looks at stocks” can also see that Treasuries never offered a real “safe haven” to begin with. To wit: The most recent uptrend in bond prices began June 12, with Treasuries soaring from a one-year low to a one-month high by August 8.
And for some of the time that bond prices rallied, the Dow Jones Industrial Average advanced to the never-before-seen 14,000 level on July 17 before turning down.
So much for moving opposite to one another.
As for anticipating the rally in bond prices, the June 13 Short Term Update alerted subscribers within hours of the June 12 low, with a compelling close-up of the iShares Lehman 20+ YR Treasury Bond Fund (approximates the performance of the medium to long end of the U.S. Treasury market). It showed prices fulfilling the downside measured move of a head-and-shoulders pattern underway since last September.
In Short Term Update’s own words: “Ready to Finally Rally? The fund is likely establishing a low right about now.”
Two days later, the June 15 Short Term Update re-emphasized the bullish case: “It appears that the forces that have resulted in the steep bond decline are now turning and should result in a relief rally in the foreseeable future.”
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