Monday, April 27, 2015

Bund; Technicals Suggest A Long Way From Home

Developments in the Bund have encouraged a more attentive following of developing technical conditions.  I noted on April 21 (‘Bund Taking U-Turn at Zero Yield?’) that the Bund had formed a technical pattern that warns of forthcoming volatility.  That volatility came the next session, when on April 22, the Bund fell more than it had in 96% of the sessions over the last 5 years. (see also ‘German Bund Wrestles with Bearish Reversal Implications’)


Since, bullish advances have been mild and fleeting.  There has been three sessions since April 22 decline and prices have failed to recover half that loss on a settlement basis.  As such, we afford greater importance to the bearish implications of the recent turn in Bund prices and should ready for another leg lower.


That the Bund can be sporting such weak technical conditions in the face of seeming dire EU/Greece developments is quite telling.  Apparently there is something that shall be understood shortly which will confirm the weaker price action of the Bund.  Whether that is some level of economic growth that was not apparent or a more encouraging development in the Greece situation, I do not know. 


What is clear is that Bund prices have fallen when all else points to encouraging conditions for the bullish contingency.  They have failed to take charge for a reason(s) unknown, but that mystery will not last long.  The Bund may be a long way from home.   

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