Long Treasury Bond

I last posted on the long Treasury on 5/1/09 when the long guy was
at 4.10%. I opined then that the yield could rise to 4.50 - 4.80% in
the months ahead on economic recovery prospects. The bond yield
was in a steep uptrend then, and I was unsure how fast it could hit
4.50%. Well, the bond topped 4.60% this week before settling back
a little.

The back story is simple. In late 2008, the bond yield fell near the
2.50% level in a panic flight to quality that produced an historic
overbought. This year as fears about the economy have eased, that
extraordinary overbought has been corrected with a vengeance. A
number of directional economic indicators have started to signal an
eventual "V" turn for the economy, and one of the most sensitive
indicators for the T-bond, the industrial commodities price composite
(JOC - ECRI), has turned up.

In my view, the T-bond is getting well oversold, and I am looking for
a long trade. I use the Market Vane trader advisory sentiment
indicator as a contrarian measure. This indicator has fallen sharply
from an astounding 91% bullish in late '08 well down into the 50s
and may be on its way to a comfortable "too few bulls" reading
before long (40% or under).

A long position in the T-bond ahead would be a short term trade.
After all, if the US economy does move into recovery mode this
year, the bond could eventually go to 5.00 - 6.00% as recovery
becomes more evident.

I have included a price chart for the bond on this go around. It
shows the bond nicely oversold against the 40 wk m/a and on
RSI and weekly stochastic. It is also approaching a significant
price support level. $USB Chart.

I plan to watch the T-bond closely over the next week or two.