For anyone who has ever tried to casually keep up with the latest fashions, you'll appreciate how hard it is to know if short skirts, skinny jeans, or fat ties are in or out at any given moment.
Such is life in the bond market too, which has been especially volatile and tortured lately given the Fed's head-fake on tapering in September, followed by the government shutdown and debt ceiling standoff that ate up most of October.
But at least one market watcher thinks the trend in fixed income has gone too far, and gotten way too negative.
"People outright hate bonds here," says Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in the attached video. "Everyone is saying we know interest rates are going to do this or that, everyone expects bond prices to go lower, and rates to go higher," he says, "but the funny thing about the way crowds works, we very well could see a surprise rally (in bonds) over the next couple months."
That's right, Detrick thinks the crowd may have gone too far and in turn set the deck for what he predicts will be a very nice contrarian play. His chosen way to play it is via the "TLT," or the iShares 20 Year Treasury Bond ETF, which is giving him separate buy signals of its own.
Not only does this chart wonk say that the TLT has "formed a nice double bottom and is starting to rise," but he also likes the fact the short-interest (or bearish bets) are at the highest level since the Spring of 2011. Furthermore, he says the percentage of investor assets that's currently invested in bonds is at the lowest level in seven years.
Add it all up and Detrick says a "surprise fourth quarter rally in bond prices," is quite possible here. That means the yield on the 10-year Treasury (^TNX) would again be closer to 2% than 3%.
"I think that's possible here," he says. "The (10-year yield) could very well make its way down to the 2% level."