Bond-market:
The BVR-model avoids high beta bonds (long-bonds) and also intermediate duration bonds.
The Bond Value Ratio is shown in Fig 4. The BVR is near last week’s level. According to the model, only when BVR turns upward after having been lower than the lower offset-line should one consider long bonds again.
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The Yield Curve:
The yield curve model shows the generally steepening trend of the 10-year and 2-year Treasuries yield spread. Figure 5 charts (i10 – i2). The general trend is up, as one can see, although the yield curve has flattened recently. FLAT and STPP are ETNs. STPP profits from a steepening yield curve and FLAT increases in value when the yield curve flattens. This model confirms the direction of the BVR..
Gold:
The modified Coppock Gold indicator shown in Fig 6. and is now invested.
This indicator is described in Is it Time to Buy Gold Again? – Wait for the buy signal …….
Silver:
The modified Coppock Silver indicator shown in Fig 7 and is currently invested.
This indicator is described in Silver – Better Than Gold: A Modified Coppock Indicator for Silver.
on this week’s BVR, is the lower switch point pointing to the wrong line?
There was no lower switch point in Jan 2014, because BVR did not move below the lower offset line and the model stayed in low-beta bond funds.
Obviously it would have been better to be in long-bonds which have gained over the first 8 months of 2014 – the rally being indicated by the upward sloping line of BVR. It will be interesting how long this rally will continue, which requires bond yields to fall further.