Wednesday - June 27, 2007
Watch the 2-year Treasury Notes (TU1620):
Two-Year Notes Call The Tune for Housing and Finance Stocks.
Traders should watch the 2-year Treasury notes. Many stock groups rise
and fall in synch with short-term interest rates rates. I present data here to show
how substantial the declines in just a month are for home-building and finance
stocks when the Treasury Notes turn significantly weak
Below is the chart for the year note's perpetual contract for 2-year Treasury
Notes, as created by Dial Data.
Keep in mind that as the 2-Year Treasury Notes rise in price interest rates
are falling. In the chart below, you can see that there had been a rising channel
of prices until mid-May, That is when the chart broke out of the bullish uptrend.
And that is when Utility Stocks, Housing Stocks, Finance Stocks, Real Estate
Investment Trusts, The Dollar, Gold and Bond Funds have started to weaken.
As they weakened, the US markets turned soft. And the NYSE Advance-Decline
Line turned down and the number of new lows start to rise sharply.
Tiger Software users can watch this chart and allied charts closely. The dip
of the Tiger Accumulation index in on April 10th to a new 12 month low was an
early warning that this instrument, and all the investment vehicles tethered to it, would
weaken. Note the trend-break of this vehicle's uptrend was on 5/24.
Here are the charts of some of the investment vehicles ompacted by the change
in trend of short-term interest rates. Recall from above that the trend-break of the
Two-Year Notes was on 5/24. Housing stocks are, by far, the quickest to react.
Utility Stocks: XLU (Utilities' ETF) fell from 41.08 to low of 39. Now 39.34
Housing Stocks Tiger Index of 31 Housing Stocks fell from 355 to 302 with today's close
HOV 25.81 17.48 32.3% decline
MTH 35.00 28.02 19.9% decline
BZH 35.35 28.54 19.3% decline
LEN 45.87 37.86 17.5% decline
CLAY 15.96 11.20 29.8% decline
PVTB 33.03 27.01 18.2% decline
MTG 65.20 57.90 11.2% decline
LEND 14.68 13.06 11.0% decline
MER 92.61 86.26 6.5% decline
Real Estate IYR (Real Estate ETF) fell from 80.72 to a low of 76.5 and
rallied to 78.87 today.
Real Estate Investment Trusts VNQ (REIT ETF) had already formed bearish head and
shoulders pattern. It fell from 74.12 on 5/24 to 70 before reversing today.
Euro 134.60 134.80 This topped out on 5/1 at its upper Tiger Regression channel.
Br. Pound 198.57 199.57 (It will take more than talk by Fed of raising interest rates to
strengthen the dollar versus the British Pound.
Gold 64.75 63.76
PAAS 26.34 25.66
SSRI 36.10 34.11
NEM 39.45 38.71
LQD 106.22 104.08 Shares GS $ InvesTop Bond Fund - Biggest Bond Fund. -
Our Nightly Hotline ($295/year) examines these charts and points out the inter-market
relations. HOV, show below, was picked as a short sale on our Hotline. TigerSoft makes
the business of profitable trading very easy.