You may have read me calling long-term T bonds just that in the past; garbage.  Why, even lead dBoy Robert Prechter calls them that in different words.  But this worthless garbage is breaking out of a Falling Wedge in defiance of the ‘Great Rotation’ media hype that attempted to rationalize chasing the maturing stock bull.

TLT weekly

There is a difference between fundamentals (T bonds don’t have any good ones that I can see other than a pumping Fed, which is ultimately artificial) and short-term liquidity and technical status.

This would be an opportune time for the stock market to think about correcting so that T bonds can think about rebounding.  Because if the long bond fund TLT does not get above the noted support (now resistance) that it just fell through, there is a long way further to fall.

I guess it comes down to whether or not Central Planning even cares what happens with interest rates.  Oh wait, of course they do.

Separately, to close out an exercise in futility, I was made to eat my VIX calls and capitulate to the bull.  Contrary indicator folks?  Let’s hope so.  I’ll go at it in other ways besides options.  That spread is a psychological killer.

The signal would be toward inflation.  This is crazy talk I know.  The Fed is going to get all austere and end QE.  Yes, it must be true; they said so in yesterday’s delayed expectations management exercise.

This is a flipped over view of the Continuum AKA our monthly view of long-term interest rates.  Maybe the most recent red arrow on the chart will not result in an inflationary phase this time.  But then again, didn’t the Bond King think that it would be different ‘this time’ in spring, 2011? *

What if it is not different this time?  I give all due respect to Prechter because I happen to believe he is due respect.  Indeed, I think EWI are forecasting a top in T bonds as well.  So we must realize that there could be a scenario where T bonds top out and yet deflation ensues.  But if the Continuum is to continue, 2013 could turn out to feature obvious signs of inflationary excess before all is said and done.

* Bond King Bill Gross famously shorted the bond just before it began a huge rise in a flight to the safety (ha ha ha) to US T bonds. 

The target of 131 looks a little silly now.  USD down, Yen down, T bond down… and gold down.  Yes, that makes a lot of sense but… iiwii (for now).

Go GOOG!  Go MSFT!  Go TDF!  Go other ‘regular’ stock market stuff that I hold.  Hey, I can play the game too.  It is interesting that as the broad market risk rises with the market, precious metals risk declines with that market.  Hulbert’s next HGNSI data release should show full suicide mode has been entered for ‘Club Misery’.

TLT 131 is the target from which a potentially epic short against the long bond could originate.  Long-Term T bonds are front and center here on FOMC day because it appears markets, media and investors far and wide are obsessing on the question ‘will they or won’t they (buy unsanitized long-term bonds)?’

Support noted on the chart should hold for the TLT 131 target to remain viable.