Interest rates have been one of the hottest market topics recently as the Fed reduced short-term rates to near zero in December and 30-year T-bond futures made their biggest six-week advance ever, an uptrend that reached unsustainable territory.
- T-bond futures (which move inversely to interest rates) moved from around 113 on Nov. 1 to above 142 by mid-December, the type of parabolic move witnessed in the dot.com and housing bubbles.
- For many analysts, the question is not whether interest rates will go up (and bond futures down) in line with inflation rates during an Obama administration but when that will occur.
- VantagePoint charts provide several clues that the break in bond futures began last week when the predicted medium-term moving average (blue line) dropped below the actual medium-term moving average (black line), a crossover marked by the red circle.
- VantagePoint crossovers provide excellent indications of new trends early in their development, as illustrated by the crossover in early November that launched the record-setting uptrend of nearly $30,000 per bond futures contract.
- Another early VantagePoint alert that a downside crossover might be in the works came from a concept called “divergence” – bond futures prices continued upward to a new high while the predicted long-term difference (green line) was making a lower high (black arrows), indicating the energy behind the uptrend was weakening from what it had been at the first high.
- VantagePoint’s predicted neural index (gray line) moved to 0.00 on the crossover, another bearish sign.
Source: VantagePoint Intermarket Analysis Software
