How to Avoid Losing 5.5% in Bond Funds
Tom Aspray, from the Viper Report, says that if you had used technical analysis rather than fundamental analysis, you might have been able to avoid the 5.5% decline in the largest bond fund over the past two months.
The markets I identified as key in August - bonds/interest rates, stocks, Bitcoin, and gold - have all continued to be important in September. As we move into the final quarter of the year, it's crucial to keep an eye on these markets and take action as needed to protect your portfolio.
As we can see from the table below, the markets have been quite volatile over the past eight weeks. In this three-part series, I will take a closer look at these markets and provide my current outlook. stay tuned!
The rising 10-Year T-Note Yield has been a cause for concern for many investors, as it has resulted in a significant drop in the value of the Vanguard Total Bond Fund (BND). This fund has a dividend yield of 2.71%, and in just eight weeks it has already lost more than twice the $1.94 dividend paid out over the last year. While the exact reasons for the rising yield are unknown, it is clear that it has had a negative impact on many investors.
I thought yields were going to move higher for a few reasons. First, the economy was starting to rebound from the pandemic, which meant that there would be more demand for products and services.
The recent rally in the 10 Year T-Note Yield is a sign of strength in the market, supported by the positive MACD indicators. This rally could mean lower yields in the future, as investors seek out safe havens in the bond market.
The current chart suggests that the dramatic rise in yields may not last too much longer. The MACDS are both already negative and could form divergences on a move in the yields above the September 27th high at 3.992%. This was a sign that yields were at an extreme. A decline in yields below the recent low at 3.568% would be the first sign that yields are turning lower, not higher.
There is no one-size-fits-all answer to this question, as the best way to avoid losses in the bond market will vary depending on each individual investor's circumstances.
It is clear that BND has been in decline since October 2021, when the MACDs both turned negative. The 20-week EMA has also started to decline, which is a bearish sign for the future. BND is likely to continue to decline in the coming months, with further support levels coming in at $80 and $75.
BND's rally from its lows in the middle of June has been stymied by resistance at its 20-week EMA. The stock has been unable to breakthrough this key level, and as a result, it has pulled back below its EMA once again.
The doji that formed the week of August 12th ended up being a bearish sign for the following week. BND closed below the doji low at $75.92, which generated a weekly doji sell signal. The weekly starc-band at $73.65 was mentioned as a potential downside target, but as it turned out, BND dropped even further.
The sky is the limit for BND. With a strong foundation in place, the company is poised to continue its upward trajectory and become a leading player in the tech industry.
The analysis of the 10 and 2 Year T-Note yields suggests that rates are likely to top out in the next month. The weekly MACDs for BND (see chart) are below zero and negative but have formed higher lows, line 3. This is a potential positive divergence which suggests BND could be forming a bottom as BND has made lower lows and recently dropped below the weekly starc- band. The MACD indicator is a technical tool that can be used to identify potential turning points in the market. The positive divergence on the BND chart suggests that the recent sell-off in the bond market may be coming to an end, and that rates could begin to rise again in the next month or so.
It is still early to confirm whether BND has formed a bottom, but I would not recommend that current holders sell given the potential for further formation. A move above the recent high at $72.24 would stabilize the chart and could signal a rally back to the 20-week EMA that is currently at $74.75. A strong weekly close above this EMA would be a positive from an intermediate perspective.
In the second part of my analysis, I will compare and contrast Bitcoin and gold. I will discuss the similarities and differences between the two, as well as their respective strengths and weaknesses.