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Research Piece: Technical Perspectives – Louise Yamada

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author/source: Louise Yamada

This month’s research piece is a bit different in nature from those we usually do. Louise Yamada, a good friend from my  Robinson – Humphrey/Smith Barney days, has generously contributed a report from her company, Louise Yamada Technical Research Advisors, LLC. This report suggests a bear market in bonds is coming, and details how to react in the event this occurs. While this report was written in February 2010, there are some great long-term charts that are still relevant. Over the years, Louise and Alan Shaw have done some of the very best long-term forecasting work I have seen. In the following paragraphs I will update some of the report, and highlight some of the areas of interest in the report.

 
Download the full report here: www.thefredreport.com/downloads/20110225/download


We show both weekly and monthly charts of the TYX (thirty year bond yields) below, and point out two things. First, rates have not penetrated the 5.50% level Louise mentions in the report. But they have double topped in the 4.70% - 4.80% area, and a break of this area implies a test of at least 5.50%. We think that 5.50% will eventually break.


Weekly 30 Yr Treasury Yield:

 


Monthly 30 Yr Treasury Yield:

 
 

Many subscribers who read our work while at Merrill Lynch have wondered whether or not we are correct on an eventual rising rate cycle (and so, for that matter, do we!). Assuming we are right, Louise’s discussion of reversals on Page 4 of the report contains one of the best explanations I have seen for why the transition from a falling rate to rising rate cycle have taken so long. Since one of our “Fred’s Fab Four” forecasts is that this is the year inflation wins, either this year (in the second half), or next year we may complete the transition to a rising rate environment.

Louise’s observation about baby boomers moving into long-term bonds as they try and retire is germane. Her point is that if rates start to rise as more and more people retire, there will be principal risk the farther out along the curve, investors will move. Advisors will have to use new strategies to safeguard client assets in this type of environment.

About LOUISE YAMADA, CMT

Louise Yamada is Managing Director of Louise Yamada Technical Research Advisors (LYA) founded October 2005. Previously Louise was Managing Director and Head of Technical Research for Smith Barney (Citigroup). Louise has been a perennial leader in the Institutional Investor poll, and was the top-ranked market technician in 2001, 2002, 2003 and 2004 prior to her departure from Citigroup.

At LYA Louise has made major calls on: The onset of the relative strength decline of the Financial sector (with reports starting March 2007); the oncoming decline of the U.S. dollar (with a report, “The U.S. Dollar – Losing Reserve Status?” in 2006); the continued structural bull market for Gold (from 2002); her 2004 Alternate Hypothesis that today's equity indexes could track the 1932-1939-1942 stock market; Bonds, the last 20+-year trend yet to reverse (2006); and many other key calls on the domestic and foreign stock markets, on energy, interest rates and commodities.

At Smith Barney for 25 years, in her years as head of Technical Research, Louise authored a weekly flagship report "Market Interpretations". It was there in 1999-2000 that she identified the developing structural bear market in the equity markets, and the Technology / dot.com collapse; the lift in gold in 2001-02 for a new structural bull market; the small- and mid-cap outperformance leadership in 2002; the emerging structural Energy bull in 2004; and other major 20 plus-year structural reversals then taking place, and not seen since 1980-82.

Additionally, Louise penned several notable reports, including "Bull Market Extension? There is Historic Precedent" (1994) and "New Horizons for the 21st Century" (1996), both the subject of feature interviews in Barron’s on May 8, 1995 and September 9, 1996, as well as the special 1999 TRENDS report "Shifting Sands," projecting major long-term structural trend shifts that are still in progress.

She is also the author of "MARKET MAGIC: Riding the Greatest Bull Market of the Century" published by John Wiley & Sons, released in March 1998 and reviewed as "The thinking bull's bible" and "a monumental book, one that all serious and professional investors should read."

Louise's Special Features at LYAdvisors have included:

2005: A “Less Americentric” World; Bull Bear Hybrid.

2006: Long Shadows on the U.S. Dollar (losing reserve status?)

2007: Anatomy of a Top; Financials Sector Bull Market Over; NASDQ New Leaders -- Technology

2008: U.S.Stock Market ... Next Leg Down.  Financials Decline is a Long Term Structural Event.  Expectations of a Structural Bear Market

2009:  Anatomy of a Bottom;  Gold -- The Structual Bull Journey;  Long-Term Momentum Buy Signals Complete

2010:  Setting the Stage: Preparing a Mind Set for a New Structural Rising Interest Rate Cycle (in February); Demographics, Equities and the Long Wave Cycle; Commodities: Inflationary Forces Still Moving to consumer Essentials (Food, Water, Energy); Energy Regains a Footing

Louise is a Chartered Market Technician and a member of the Market Technicians Association, the American Association of Professional Technical Analysts and the Financial Women’s Association. Louise appeared as a special guest on "Louis Rukeyser's Wall Street" and appears frequently on Bloomberg TV and Radio, CNBC and BNN TV as well as in print and online media including Barron's, the Wall Street Journal, the New York Times and the Financial Times. She is a frequent guest speaker at conferences and organizations, including the 2009 Fall Conference of the National Organization of Investment Professionals and the 2010 FEI NYSE forum. Louise received a B.A. from Vassar College and an M.S. from Bank Street College of Education.


 



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