The Danger Of Predicting The Future


I use a smidgen of technical analysis. I find support and resistance levels useful in shorter term time frames, particularly when choosing entry and exit positions for a security that I need to move. The problem I have is trying to compare market participant behavior to a market that happened in the past, even decades ago.

There is much speculation right now about the bond markets. Many are trying to draw the conclusion that we are in 1994 again and we should expect a significant correction in the bond market. Maybe, just maybe, enough bond market participants believe and this turns into a self-fulfilling prophecy. But more likely, “it’s different this time.”

AGG Weekly Chart 06-13-2013

We have an unprecedented amount of stimulus in the market. The Fed has scared some investors by publicly discussing a time when in the near future where they slow down their bond purchasing program. Here’s the truth: bond rates were probably too low a month ago. But that doesn’t mean the 10yr is going to shoot from 1.6% to 5%. The Fed won’t let it happen unless the unemployment number gets significantly better. And right now, it’s not.

So yes, for history’s sake, it is smart to pay attention to how things played out in the past. But for your own sake, stay vigilant…and stick to your plan (and pay attention to the Fed next week.)