Hey, Look Meredith! – Muni’s Are About to Fall

• Posted by Greg Harmon
• on January 25th, 2012

Meredith Whitney became infamous for predicting a catastrophic growth rate in Municipal bond defaults. She has made plenty of good calls in her career but this one may haunt her forever. And she still may be right. I am not predicting that her prophesy will play out but looking at the charts for the iShares S&P National Municipal Bond Fund, $MUB, the start of a run lower may be about to happen. Will it end in catastrophe? It is a bit early for that prediction in my estimation but hey you never know. Let’s take a look.

iShares S&P National Municipal Bond Fund, $MUB, Daily

The daily chart above shows that the ETF is consolidating in a bull flag just over 111. This is also near the Measured Move higher from the last breakout at 107 so it may just be a pause before the next leg higher. but there are Topping Tails showing up with the Relative Strength Index (RSI) probing into technically overbought territory. That has happened before and it has corrected sideways so a down move is not a given. The Moving Average Convergence Divergence (MACD) indicator is also about to cross negative, but that has happened before and corrected sideways. But this is also not a typical bull flag. The volume has not been falling off. Rather it is increasing. So is just Topping Tails enough to turn the tide south? Well there is more, look at the weekly chart below for more ammunition for the call lower. This chart shows that even with the Bollinger

iShares S&P National Municipal Bond Fund, $MUB, Weekly

bands expanding, there are also topping candles on this time frame. The RSI is the big key to this chart though at 83. The last time it was here it corrected down 10%. So, it may not happen tomorrow or even next month but unless the ETF gets up over 112 the charts are pointing lower.

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