Bond Buyers in a Death-Grip – Where’s That Selloff Cash Going?

Posted by Richard Russell - Ross Clark

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The chart below reveals the month of August has not been kind to Bond investors. 

Bond buyers in a death-grip. Investors looking for safety have been piling into US Treasuries, even though it cost them, since they were receiving negative yields. It was one of the biggest bond bubbles in history. But now, it seems that the fun’s over. The yield on the bellwether 10-year note is spurting higher as you can see on the daily chart below. As investors flee the notes and bonds, the yields (which are inverse to the price) head higher. The drop in bonds is going to cost investors billions in losses.  – Richard Russell of Dow Theory Letters


Suddenly a lot of cash suddenly lose and searching for a return.  The chart below argues powerfully that investors “fleeing” the Bond Market are going to lose a lot of purchasing power if they just put the money in their pockets.

Picture 2

With the Dow Jones moving up to less than 30 points from a 4 year high, cash is moving into Stocks.

 Richard Russell, a Dow Theorist again:

“Finally, a hopeful signal. Yesterday, amid all the low volume and sluggishness, the Transports gave us just a hint of something hopeful. It was a breakout of the declining trendline, as you can see on the chart. The Transports have been the laggers all year, and it seemed as though if the Industrials closed above their May peak, the Transports would not confirm. Now with this little upside breakout, the Transports are giving us a ray of hope. Maybe, just maybe, the Transports will add on a few more point,s and get in the game.

So investors are selling into 32 year Bond Bull Market that hit an extreme, never a bad idea. With that massive amount of cash flowing from a Bond Mkt that is 3 times bigger than the Stock Mkt, how high will that Stock Market go:

 Ross Clark of Institutional Advisors

“Historically the Sell Side Indicator, which is the consensus of opinion of the analysts in New York of what percentage of an investors portfolio should be in equities,  has ranged as low as 47% when everybody is quite negative to the high 60’s when everyone is extreme bullishRemarkably right now the Sell Side Indicator is only 44%! Plotted against the S&P 500, the sell Side indicator phas a phenomenal record of revealing big upside moves in the market in the 20-30% bracket. 

In summary, at this moment Stocks not only appear to be a safer investment than Bonds, history say’s they are about to rally  20-30%. 

Rob Zurrer for