I would like to start with my tweet I posted 10 days ago.
So far this has been a great call. Before continuing, please read my past post about gold here, where I discuss that gold price is likely to trade lower.
Now, back to bonds.When the bond king agrees with your view, then there must be something on it.
Outside week for US 10-year yield. Lower low than last week's hit intraday Monday, then higher highs each day ending in weak close. Bearish!— Jeffrey Gundlach (@TruthGundlach) June 30, 2017
To show what me and Jeff see, let me show you the chart of 10 year T-Notes.
The price could be headed to retest this year’s lows at 122’40. Let’s see what happens down there, if the price gets there.. I don’t want to call it, but just to be aware, if the price would trade lower than that, I think we could call the end of the 4 decades long bond bull market.
On Thursday many of the equity top callers got something to call the top again. If you remember, the day was very volatile with $VIX spiking. But
Did it cross your mind that today might be just one of those days before quarter end with profit taking and the boat a bit overcrowded? $SPY— Domen Butala (@DomenButala) June 29, 2017
I don’t want to sound bold, but I don’t think the top is in. It fascinates me that all these top callers are ok with calling tops, but are at the same time saying ‘bottom fishing’ is dangerous (in other words: don’t try to pick a falling knife). We might be due for a correction, but again, usually the tops need time to develop, they are not an overnight event.
I got this out, so let’s continue. While bonds are set to fall, iShares Micro-Cap ETF could be set to rip higher. This week $IWC broke above its trendline resistance and is targeting at least $96 level now.
If you’re thinking to rather buy S&P500, I’d argue its wiser to go with $IWC.
And let me finish off with showing you the ratio between $IWC and $TLT.
I don’t know about you guys, but I’d say this is set for a break higher. If this happens, being short bonds and long micro caps could be a great play.