Santa's Pillars

Have you seen this before?

Santa came up with this years ago. The five "pillars" were meant to symbolize the conditions under which gold would trade from $250 to $1650. As you can see, 4 of the 5 have come to pass.

What about #5? Over the years, its come to mean an end to the now 29-year bull market in bonds. What would be our signal that the bull has ended? For many, it would be a significant break of the trendline drawn from the 1982 lows. About six months ago, I asked Trader Dan for a historical chart of the U.S. long bond. Here is what he sent:

I emailed him today and asked him to include an updated version of this chart, along with some commentary, with his next blog post. Once again, you can find his new blog here:
http://www.traderdannorcini.blogspot.com/
He replied that he will be happy to post something later so keep checking there for an update.
And, as always, Santa can be found here:
http://174.133.72.211/

OK, back to that chart. It would seem that critical, if not vital, support lies in the area around 115. A breech of that level, and then a further decline through 110, would seal the fate of the long-term bond bull and it would mark the true "beginning of the end" of the U.S. ponzi. Therefore, long bond prices must be watched closely. This is also just another reason why Q.E. will not end in June of this year. It won't end in June of any year. It is truly QE to infinity.

Now, that said, let's review three long bond charts. First, here's the daily Feb11 long bond future:

Note that on the date QE2 was announced, the long bond was trading around 130. It almost immediately began collapsing toward 120. (For neo-Turdites, remember that falling bond prices mean rising interest rates and we simply can't have that. Go back and watch this for further explanation.) http://www.youtube.com/watch?v=9FGVtJRWP6k
Below 120 in early December, its clear that the Fed began to directly intervene and support the bond market as you can see the very odd, 2-month, 3-point range that followed. Uh-oh, don't look now, but the bottom has dropped out of that range. After a slight rally today, price stands at 118-10 and, to me, looks to be headed lower.

But, how low? Well, here's a weekly chart to review:

Here you can plainly see all the Fed-inspired support that lies around 115. My guess is that we're headed there pretty quick and you are about to see a great, gargantuan struggle unfold. Here's a monthly chart to ponder, too:

So, lets put all of this back together.

1) The long bond is breaking down and appears headed to a test of the all-important 115 level.

2) The Fed will defend that level with unlimited Q.E.

Then, you get two possible results:

3a) 115 fails. The long bond begins to collapse. Interest rates begin to sharply rise. The U.S. ponzi begins to unravel. The entire political/financial complex begins to collapse. Aren't you glad you own gold and silver?

3b) 115 holds but only through massive Q.E. All of those freshly printed greenback continue sloshing around the global financial system. This causes continued sharp price increases in all things dollar-denominated. Inflation rates skyrocket. Global unrest intensifies. Wars. Insurrections. Riots. Madness of biblical proportions.  http://www.youtube.com/watch?v=O3ZOKDmorj0
Aren't you glad you own gold and silver?


On that happy note, I'll sign out for today. However, keep a vigilant eye out for Blythe and The Monkeys. If I spot something interesting later tonight, I'll let you know. TF

ps To these ends, don't forget that the new POMO schedule will be announced at 2:00 EST tomorrow.