The recent ‘spike’ upward in bond prices produced a signal to sell US bonds, as recommended in the last edition. German government Bunds also made a top extension, as shown here, which means that their rally has now stalled too and they can be sold. Prices are well off their highs and so we will wait before advising this trade to see if there is a small rally to give us a better entry point – indeed if you see one, just go ahead without further advice from us.
A potentially better trade is to sell Italian Government BTPs. They compressed on Wednesday this week and broke downward very fast the next day – too fast to catch with a short-sale recommendation. Now they have bounced back to the level of that compression which regular readers will know is a second opportunity to take the trade. Sell short now with stops above the upper boundary of the compression which lies at 131.26 in the December contract shown here:
