Interest rates along with the stock market backed down today after Treasury Secretary Geitner expessed continuing concern over the financial recovery. Notice in the chart above how interest rates fell back nicely to the moving average and appears to be positioned to break out to the upside.
In previous writings, we illustrated how rates could surge to 3.6% by early June. Sure does look like a good possibility from these levels. Last week, I was unsure that rates could hold this channel. I have not expressed any confidence in this government-engineered spurt in the market. The bottom line is the continual devaluation of the dollar and increased debt issuance keeps us positioned in our core stock market portfolio with ultra short dollar and bond positions. Government intervention in the 10-year and 30-year treasury market is always a threat for our short-term derivatives positions. It was best to remain cautious.
The daily chart looks like we can expect a pop in rates tomorrow. Position yourself appropriately.,