Thursday, March 26, 2015

[$TNX.X] update

At the backlink I provided the model below with commentary indicating that I think the next motive wave up could be in progress.

Since then, my hunch proved to have been correct, we are certainly forming a motive wave up in interest rates.  A move past $20.60 will confirm that wave 3 up is in progress and that should force the broader markets, which are all leveraged to the max on margin debt, to begin selling. 

If wave 1 of 3 of 3 up is in progress as I believe that it is, then markets should breathe a sigh of false relief as TNX pulls back into wave 2 before the selling panic begins as wave 3 of 3 upward in interest rates forces the fed to suddenly develop a near term love for higher interest rates even as broad economic indicators continue to fall

I believe that soon the fed will likely have to choose between saving itself and extending the economic Ponzi.  If it sacrifices its own credibility then, the fed governors will argue, it limits the utility of the federal reserve as a sales mechanism for US national debt (both in terms of treasury bonds and in terms of the US dollar which is in fact not money as most people have been fooled into believing but rather a debt note).  In other words, if confidence is lost in the fed - if the world sees that the fed has lost control of the bond market - the fed will be much less effective in retaining global confidence in buying US debt and in holding US dollars

That will be their internal argument for raising rates.  They will make up some other kind of lie to feed the masses, probably something to do with how much they are concerned with income inequality so some other obvious cover story.  Of course, the real underlying reason is that the fed governors don't want to lose their jobs.  So they must raise their rates to make it look like they are controlling the bond market when in fact they don't really control Jack $hit.  The Wizard of Ozt is just a con man running a con game.  The herd can fall for a con but not forever.  This is the dirty secret of the federal reserve which one in perhaps 10,000 actually understand: the market is bigger than the fed and once it stops listening to the con, the con is over, period.

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