Weekend February 14, 2015
I got back in the whacky securities business in about 1982. I was reading Ian Cavity's Deliberations at the time. He thought rates would stay high but looking at his graphs, I concluded the high was in on rates. Rates would be coming down as would the price of oil. Thus began the 33 year bond rally. Has it ended? Consider the situation.
- Many European bonds now are at negative rates of return
- Yellen has announced rates will rise starting June
- Deflation is everywhere
- Very short term rates have been rising
- Long term thirty year rates just violently reversed to the upside-rates have fallen for seven trading days in a row
- Long term municipals sport a clear five waves up
Thirty Year Yields

The nomenclature at top left obscures the start of this chart but yes yields fell from about 14-15% to the recent 2.2% low.
Franklin Fed Tax Free

This is classic textbook Elliott Wave.
- Wave One starts at a definite low, under the MAs.
- Wave two and four alternate with two being a sharper down and up, but a successful test of the 200 bar MA each time
- Wave Three is the largest wave
there is no way of knowing if this is THE END at least not yet.
Closed End Munis

This closed end fund from Blackrock exhibits the same pattern as Franklin. At bottom a lower MACD is typical of a fifth wave finish. In the top panel, on balance volume hits a new high as investors seek yield. They always do when rates bottom.
JUNK JNK

A junk bond is really just a common stock in drag sporting a yield. Thawed count is not as clear but if the price falls short of the previous high and reverses the high is likely in.
Investors are jumping back into junk bonds. After pulling $16 B to last year about $5 B has gone in this year. This also reflects the ups and downs of the European market where several countries are in junk territory like Greece.
TBF the reverse of TLT

TBF began shortly after the worst of the crisis in March of 2009 so I think the wave count here is valid.
Ten Year Note Price

The ten year note may have topped already in 2013. It looks like the counter turned rally just failed.
CRB

Commodity prices are about as low as at the bottom of the financial crisis. Is deflation finally hitting lows? if that is the case, could all the money Central Banks flooded the world with, could that money harken some inflation later? Is that what the bond market is telling us?
Dr.Copper

The trend has not reversed, this is a CRB component.
XLE

Bingo we have a cross over in the XLE energy ETF, note the nice move up Friday. I don't know that THE low is in I am thinking a third wave low was seen with a fifth to follow but then I thought theistic market had topped as well, so what do I know.
FXC Canadian Dollar

I am long FXC. Myth inking is that we will have an oil move up which means currencies of commodity exporting countries will rally. Okay it is slow bu tit is happening.
Dow Diamonds

Call it Risk on or what you will, higher prices ahead for he Dow as bond prices sink.
The Bottom Line
Stock move higher in a seasonal patter from their low in October.
Bond prices sink, is it just is on or are bonds telling us the deflationary era is coming to a close.
Oil looks higher as well as energy and energy service lagging last.
The Canadian and Aussie Dollars are stirring looking for a bottom.
Social Mood
In fifth waves, society shows an embrace of nostalgia, a retro look back. This was in evidence on my trip this past weekend to a conference in Vegas. Here is a sampling of the shows.
Not one but two Beatles Tribute shows, the one I attended was just outstanding at the Saxe theater
https://vtheaterboxoffice.com/las-vegas-shows.cfm?showid=10003
Tribute to the Million Dollar Quartet of Elvis, Jerry Lee, Johnny Cash, Carl Perkins
Bob Anderson does Frank Sinatra
http://www.venetian.com/entertainment/shows/frank.html
The Rat Pack is Back, what could be more Vegas than those four
http://www.ratpackisback.com
Donny and Marie
http://www.caesars.com/flamingo-las-vegas/shows/donny-and-marie.html?utm_source=google&utm_medium=ppc&utm_term=donny%2520and%2520marie%2520at%2520the%2520flamingo&utm_content=General&utm_campaign=LAV_FLVVis.DonnyMarie_Exact%257CINC%257CBrand%257CENT%257CFLV
Donny and Marie alternate with Olivia Newton John
http://www.caesars.com/flamingo-las-vegas/shows/olivia_newton-john#.VODE3UL_Dt4
Legends at the Flamingo - this rotates among various stars of the past, my show included Michael Jackson, Katy Perry, Steve Tyler (who I cold not place), Celine Dione, and of course, Elvis
http://www.ticketcounter.com/las-vegas-shows/legends-in-concert/?utm_source=google&utm_medium=cpc&utm_term=legends+at+the+flamingo&utm_campaign=google_cpc&mm_campaign=Legends+In+Concert+-+US%2FCanada&mkwid=sOh2hrL8P%7Cdc&pcrid=41987457044&gclid=Cj0KEQiApIGnBRCFx-idn7-E2Y8BEiQAc6fQbJU9sNai9MhI_dmMn_KRY-tDbqWCZoSa7qAGkzJbI9QaAr3w8P8HAQ
Truly there is nothing new under the sun
ennislelam@gmail.com
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