Muni’s Are Re-Heating the Debate

When you think of Municipal Bonds you are of one of two camps. Either you follow the Meredith Whitney camp where the world is going to end, California will be a wasteland and everything is going to zero. Or you follow Alexandra Lebenthal where all is well and muni’s are going higher. This can make for great debate and both can end up being right as well as wrong. That to me entails what is wrong with Fundamental Analysis. From a long term macro view I tend to agree with Meredith but I trade, so I put that aside and look at the price action. It tells me that the debate is about to heat up. from the chart below the iShares S&P National Mortgage Bond Fund, $MUB, is approaching a point of inflection from two perspectives. First, the blue trend lines are creating a symmetrical triangle and price is heading into the apex. A break above this falling trend line has a

Measured Move to 116 while a failure likely retraces to the lower trend line. This would currently be around the 50 day Simple Moving Average (SMA) at 109.50. But before it can get there it has another issue to deal with. The green Andrew’s Pitchfork shows that price is being attracted to the Lower Median Line currently at 110.20. A move below that line does not have far until it reaches the dotted Hagopian trigger line near 109.60. A move below the trigger is a bearish entry signal. Note this is very near the blue trend line. So there are two coinciding bearish triggers. A break down has a price objective of 103.60. Two patterns, two price targets as it heads into an action zone. Buckle up and get ready for the trip.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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