Monday, August 31, 2015

8/31/15 Deflationary trade is over for me

On the 7/14/15 post TLT was 117.23.  On the 8/3/15 post it was 123.55.  Friday 8/28/15 closed 122.36.  Three percent in six weeks is good.  If you are a serious trader and don’t go driving out of town with no ability to connect to the internet you might have closed your position on black Friday or even black Monday at perhaps 127 or 128.

This deflation trade was based on the 50 day moving average crossing down over the 200 day moving average and appearing to bottom and turn up.  Now fundamentals of supply and demand are in question.  China and other countries may be a steady source of supply.  Who is going to buy that supply?  Is the US Treasury going to start selling bonds again in November after the debt ceiling thing is put to rest?  Currency exchange rates will have a say in this.  Comments coming from Jackson Hole confuse me.  Vice Chair Fischer made clear that the most recent economic data and the direction of financial markets over the next two weeks would help determine whether the Fed raises rates next month. Two weeks?  There are way too many moving parts for me.  That is why I mostly close out too early leaving money on the table.  But that is me.  I accept it.  My general feeling is that prices of bonds can go higher but I don’t have a technical indication for another short term move.

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