Thursday, May 14, 2009

Producer Prices Up 0.3%

Rates fell further this morning despite a worse than expected Producer Price Index reading of +0.3% in April. Higher food prices led the surge. Initial unemployment claims data was also released this morning showing that the unemployment problem continues. While today's report showed 637,000 more jobs lost, more troubling was the increase of 6,000 in the four week moving average showing that momentum continues.

Chart Pattern Shows Opportunity

Notice how rates have come to the bottom of the channel. It's no surprise that rates have backed off as they near strong resistance at 3.44%. I expect that rates will remain down on the week and moderate at low levels through next week. Next Friday Options of Bond and Note futures expire and the low rates cause futures prices to be higher. I expect the following week, that rates will again surge, breaking through overhead resistance moving towards my target of 3.6%.

Now is the time for extreme caution with your investments. Again we appear to be setting up for the same situation that sunk many investors last year, that is prices of both stocks AND BONDS are setting up for declines. Without EXPERT investment management many are sure to get clobbered again. Keep in mind that while diversification is the key, diversification means having a portfolio of assets that are NOT CORRELATED. Having a good mix of stocks and bonds might not be enough as it appears that BOTH STOCKS AND BONDS WILL GO DOWN!!!!

Make sure that your investment manager can show you proper risk management strategies to make sure you are NOT TAKEN TO THE CLEANERS - AGAIN.

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