Interest Rate Indicator

Having a reliable bond indicator is important not only with respect to your fixed-income investments, but also in guiding you with investments in financially related sectors. The Dow Jones 20 Bond Average is our bond indicator of choice.

The dow jones 20 Bond Average (DJBB) is our primary interest rate indicator and has been one of the best indicators we have seen. This obscure index is comprised of ten long-term industrial bonds and ten long-term utility bonds. We plot this index on a point and figure chart using a .20 box size. Like all point and figure charts we keep, it requires a three-box move to cause a reversal, which would be .60 in this case.

The chart is then maintained like any other. When reading the DJBB chart, we are looking for two types of buy signals. The first is a double top break. This is the simplest of buy signals and occurs when a column of Xs exceeds the previous column of Xs. The second signal is called a low pole warning. In this case, the chart exceeds the previous bottom by at least three Os and then reverses back to the upside and retraces the previous down move by greater than 50 percent.

The opposite is true when looking at sell signals. When a double bottom break, the simplest of sell signals, is given, the chart is on a sell signal. A high pole warning is also considered a signal to move to the sidelines. Opposite of the low pole warning, this occurs when the chart exceeds a previous top by three or more boxes and then pulls back by greater than 50 percent of the previous up move.

Following this one bond indicator, imagine the money you could have made in bonds or bond funds, or just knowing when to lock in your mortgage.

- May 1992.

The chart broke a double top at 99.20. It stayed on a buy signal, indicating lower rates, until November 1993. The chart gave subsequent buy signals at 102.60 in January 1993 and 104.60 in April 1993. The chart was on a buy signal for approximately one-and-one-half years.

- November 1993.

The chart broke a double bottom at 105.60. It had been on a buy signal since May 1992. This sell signal led to higher interest rates and three more sell signals. The chart eventually bottomed at 93.60 before the chart managed to move back to a buy signal. We advised all of our clients to lock in their adjustable rate mortgages.

- January 1995.

This double top break at 94.60 lasted about seven months and led to a move to 103.60 before it gave a sell signal.

- July 1995.

This was a short-lived sell signal. The chart broke a double bottom at 102.80 and fell to 102 before it was able to reverse back to the upside and give a low pole warning.

- September 1995.

The DJBB managed to retrace greater than 50 percent of the previous decline, giving a low pole warning at 103. This put the chart back on a buy signal. The buy signal led to a breakout at 103.80 and eventually a high on the chart at 106 in February 1996.

- March 1996.

After reaching 106, the chart pulled back, giving a high pole warning at 103.80. This signal indicated higher interest rates and led to two sell signals on the chart, which fell to 101 in July 1996.

- August 1996.

The chart exceeded a previous top, moving the index back on a buy signal, suggesting lower rates. The break was followed by another buy signal and a high of 104 in November 1996.

- January 1997.

A double bottom was broken at 103, moving the DJBB back to a sell signal. In April, the chart had fallen to 101.20.

- June 1997.

The chart rallied in June to give a low pole warning indicating higher prices from this index and lower rates. The chart then gave three double top buy signals, reaching a new chart high of 107 in October 1998.

- February 1999.

A double bottom was given, moving the chart to a sell signal. This sell signal led to six more double bottom breaks by February 2000 and a low of 95.

- February 2000.

The chart gave a short-lived low pole warning, the first such warning on the chart that did not lead to a buy signal. In March the chart was back on a sell signal.

- March 2000.

The index failed to get through resistance at 96.40 and broke a double bottom, moving back to a sell signal and thus indicating higher rates.

- June 2000.

The Dow Jones 20 Bond Average fell from the March sell signal at 95.6 down to a low of 93.4 before giving a low pole warning at 94.6. Note that the Dow Jones 20 Bond Average has now fallen slightly further than its December 1994 lows of 93.6.

- September 2000.

A high pole warning was given at 96 to move one back to the sidelines on bonds after a profitable upside trade from June to September. Notice, though, that the Dow Jones 20 Bond Average continues to make overall higher bottoms after bottoming out at 93.4, right at the same area it bottomed in December 1994.

- December 2000.

The low pole warning in September did not result in an actual sell signal and the series of higher bottoms was maintained. The Dow Jones 20 Bond Average goes back to a buy signal with the double top breakout at 97.2. At this writing, this bond average has rallied to 99.6 and remains on a buy signal.

There have been fourteen signals in the Dow Jones 20 Bond Average since 1992, and eleven of those signals have resulted in profitable trades. That is being right almost 80 percent of the time not a bad percentage, and these signals kept you out of bonds in the disastrous 1994 and 1999 markets and in them for the nice rally in 1995. The point is that not every signal, whether buy or sell, will be right, but you want to play each one accordingly, given the track record of this indicator.

Articles on stock market trading, finance, share tips and many more stock trading related information. If you want to make money out of this visit http://www.2stocktrading.com/discount.html.

online pharmacy no prescription good cialis online pharmacy no prescription needed no prescription drugs no prescription needed drugs no prescription pharmacy cheap drugs without prescription online pharmacy without prescription pharmacy online pharmacy no prescription