StreetSmartPost

Saturday, February 27th, 2010. 10 am.

We’ve been hearing a lot of warnings from Wall Street, and therefore from the financial media, that investors should avoid U.S. bonds.

The warnings sound plausible. The U.S. is the world’s largest debtor nation, depending on the kindness of friend and foe to fund its massive debt, by buying the tons of new bonds that must be issued monthly by the Treasury Department. But foreign holders of U.S. debt are antsy about how their foreign reserves have become dominated by dollar-denominated assets. They may not only back away from buying more U.S. bonds, but even begin unloading some of the bonds they already own. Bonds are also sure to plunge in value as the Fed halts its stimulus program in March, by which it has been purchasing massive amounts of treasuries and mortgage-backed securities, sure to cause interest rates to rise (and bond prices to fall).

We’re even hearing that bonds are in a massive bubble since interest rates are so low (bond prices move up when their yields move down, and their prices move down when their yields begin to rise again).

And yet when we look at the charts of treasury bonds, the 30-year T-Bond Index was in a spiked up bubble at 145 at the end of 2008, as a result of investors moving money from stocks to bonds as stocks plunged in their bear market. But with the beginning of the new bull market in stocks, the bond index plunged 20% and is back under 120, where it seemed to find support at a long-term trendline at the beginning of this year, and has been rallying again.

Bonds have been in a stealth rally since the first of the year, and gained 2.3% just this week, one of the few safe havens. We have had subscribers buying bonds (via an etf).

Global stock markets have been losing their upside momentum.

The VanGuard European etf, which tracks with European markets, is down 15%. Stock markets in the strongest global economies, China and India, which Wall Street has been touting as the place for investors to be, are down 12% and 8% respectively. Japan, the 3rd largest economy in the world, sees its stock market down 8%. Mutual funds tracking with emerging markets are down about 10%.

Only in the U.S. does there seem to be few worries, as least as measured by the stock market, where both the conservative Dow and the speculative Nasdaq are down only 3% or so.

It would be unusual for global markets not to move in tandem for long. In the current divergence which have it right?

Yesterday in the U.S. stock market.

A narrow trading range of only 80 points for the Dow between its intraday low and its high, and a basically flat close.

Yesterday’s intraday chart:

The Dow closed up 4 points, or 0.04%. The S&P 500 closed up 0.3%. The NYSE Composite closed up 0.3%. The Nasdaq closed up 0.2%. The Russell 2000 closed down 0.3%. The DJ Transportation Avg. closed up 0.5%.

Global markets for the week.

After two straight up weeks, back to a down week.

If you’d like to see a three-month chart of any or all of the above indexes click here, and then click on any of the markets in the similar list at the left side of the page it takes you to.

What’s next for the market?

In the U.S., next week will be another week with a number of potential market-moving economic reports, including the ISM Mfg Index, Construction Spending, and Pending Home Sales, but will mostly be about jobs, jobs, jobs, with the ADP Jobs Report and what we always refer to as The Big One, the Labor Department’s Employment Report. To see the full schedule of next week’s reports click here, and look at the left side of the page it takes you to.

The market will probably continue to pay more than normal attention to the economic reports, given how recent reports support the forecasts of economic growth slowing in coming quarters, including some forecasts that it may dip back into recession, as is the concern with Europe.

Stock Market Patterns.

The next pattern is the ‘Monthly Strength Period’, which was due to begin yesterday and to run through next Thursday (March 4). Its tendency to be positive is quite persistent in bull markets, not so often in bear markets.

Interesting Charts of the Morning.

Yesterday I showed you charts indicative of global markets that are in the vicinity of their 21-day moving averages and seemingly undecided whether it’s a resistance area that’s going to result in a resumption of the correction, or will give way to a resumption of the previous week’s rally.

Yesterday I showed you charts of India, Brazil, France, Russia, Germany, and Japan (Scroll down to see them).

Here are a few more in a similar situation.

Please scroll down to see other recent ‘Interesting Charts of the Morning’ and commentary.

To read my weekend newspaper column ‘Is the Stock Market Saying the Economy Will Remain Strong?’ click here!

I’ll be back Monday a.m. after a look at events over the weekend, Asian markets Sunday night, and early morning indicators for Monday.

SUBSCRIBERS: There is an updated intermediate-term ‘Market Signals, Charts, and Recommendations’ report on your website from Wednesday, and an updated ‘Gold, Bonds, Dollar’ signals and charts report from Thursday.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term signals and market moves that are most important to investors. So, please consider a subscription to our independent research and recommendations. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my latest book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information.

Save