Volatility is reaching support - Expect a RISE in Fear

Short term Volatility fund VXX is reaching a Support trendline. I expect Volatility to rise and this should mean fear will spread again.

Bonds are trading higher - Yields are easing

TLT has notably bounced off Gap Support line and TYX correspondingly is trading lower after reaching my notional target at 3.9% as I wrote a week ago. All is going okay in the New Normal...

Japanese Govt Bonds are correcting but running into Support

Yield is creeping higher inside the downtrend channel targeting 1.46%.

Weekly bond prices came off Overbought levels on the Weekly RSI however they are at a long term support level and will have to consolidate before the move resumes and certainly IF only the global re-flation is on the menu again.

Investment Cycle by John Paulson

This interesting piece was published and insightfully commented by ZERO HEDGE.

Here a link:

http://www.zerohedge.com/article/exclusive-paulson-portfolio-post-mortem-which-we-learn-maestro-himself-advising-jp-future-go

The rising Volatility in the Bond market signals a possible trend change

The Long Bond is trading inside a rising trend channel and bounced off the 13-Day MA Support on the last Friday Option Expiry as Tonbridge AL kindly reminded.

The COT Report however shows a possible change of hands as Commercials and Large Speculators are exchanging their exposure and that is a serious sign of caution. The trend has been strong but it always reaches a point where it bends and the rise in Volatility on last Friday is a sure sign of possible change.

10Y Note has similarly reversed the Friday volatility break but the COT Report here also shows that Commercials as swapping holdings with Large traders and we should remain cautions of the underlying moves.

30-Year Treasury Bond yield reverses with initial target at 3.9%

Bouncing off the lower channel trendline 30-Year Bond yield is targeting initially the Upper trendline resistance at 3.9%. RSI and ROC are indicating there is a reason for strong conviction in this trade, not to mention that the candle is qualified for a Key Reversal sign.

Japanese Government Bonds near their 20-year High

Japan 5-year CDS is making Higher Highs/Lows.

JGBs are drawing investors attention recently as they are close to 145 which was their 2003 High price. Monthly RSI is not even in Overbought condition so timing of a Short sell would be of a great importance since this market has been ranging for a full decade with no meaningful correction.

Kyle Bass from Hayman Advisors made a pile of money in the sub-prime crisis and he is now on the wires for his Short JGB position:

http://www.marketfolly.com/2010/08/kyle-bass-betting-against-japanese.html

While deflationary pressure is building and everybody is starting again the bond bubble talk I'm pleased to observe a high momentum trend in bond prices and I believe it will be a nice educational experience to see how high it can go until it finally breaks. Then when inflationary cycle begins we will be ready to start building an equities allocation.