Observations on a 5-Year Flight to Safety ~ The Risk Averse Alert

Tuesday, November 24, 2009

Observations on a 5-Year Flight to Safety


Coincident with the collapse of Wall Street's securitization business — a Greenspan-sanctioned, private sector credit-creating machine equipped with an infinite multiplier — has been a most natural flight into the safety of U.S. Treasury securities...


$FVX

We see here that, both sides of the credit system's "Inflate or Die" mantra find representation in momentary trends in the yield offered on 5-year Treasury Notes.

To wit: whenever credit is somehow, someway, made easy, peasy, resulting in a flood of liquidity in response to systemic threats precipitating from the collapse of Wall Street's securitization business ... Treasuries are sold off, commensurately causing yields to rise. Not coincidentally, this is when the stock market contrarily catches a bid.

On the flip side ... whenever credit is somehow, someway, contracting and deflating ... this as a natural consequence of the collapse of Wall Street's securitization business ... Treasuries are being sought out for safety they offer, thus causing their yields to fall. Again, not coincidentally, this is when the stock market has come under pressure.

So now look at the present state of things. Observe similarities to the latter half of 2008, as well as 2007. The 5-year Note's yield and moving average relationships are of interest here, as are current, transitioning positions of both RSI and MACD ... suggesting a rush into safe, longer-dated U.S. Treasuries could be commencing imminently — this following the recent mad dash into Treasury Bills whose effect drove yields in some cases into the negative.

Keep an eye on this, because the "Inflate or Die" mantra of our global, wildcat financial system most certainly lives on and apparently reveals its increasingly volatile state via capital flows into and out of widely perceived safe U.S. Treasury securities...


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© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

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