Looks Like John Q. Public May Not Have Picked A Swell Time To Jump Into Stocks, Dump Bonds

The public loves stocks again. Time to short?

According to the latest report from the Investment Company Institute, investors bailed out of bond mutual funds last week for the third straight week, and the exodus accelerated to the fastest pace since October, 2008.

It’s interesting that the bailout in October, 2008 took place just before the big spike up in bond prices that began in November, 2008.

The bail-out of the last few weeks comes after bonds have already tumbled sharply, a decline that began after investors piled into bonds and bond funds at a near record pace for most of this year.

Are they selling near a low again?

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We’ve been on a sell signal for bonds at Street Smart Report and have seen our downside holding in the ‘inverse’ bond etf TBF (designed to go up when bonds go down) gain as much as the stock market over the last three months. The 30-year bond has declined 10.3% since October 1, while the S&P 500 has gained exactly the same amount.

However, while we’re still on the sell signal for bonds, bonds have become oversold on the charts, possibly nearing a buying opportunity.

Meanwhile, the outflow of money from U.S. stock mutual funds that took place at a startling pace last year and most of this year, even as the impressive new bull market in stocks began and continued, did not reverse to inflow until October. And investor sentiment has spiked up to high levels of bullishness usually associated with market tops.

While bonds are becoming oversold and possibly nearing a buy signal, are stocks overbought and nearing a sell signal?

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Who is selling bonds if Bernanke buying as a madman?

Bond purchases of Ben, but someone selling

QE2 comes, and it is not Fed purchases in large quantities with its easing quantitative of stocks.Elle purchases of government bonds, in order to drive long term interest rates must drive the price of bonds until.

But the bond market has not been as excited QE2 idea everything that promised to purchase as market fact boursier.En, just the opposite. The obligations of the Board were tumbling since late August.

For example, 30-year bonds have lost about 3.4% of their value in less than two months.This is a notable success for an income asset that gives approximately 3.9% per year.

The popular iShares 20 - year will Bond ETF (TLT) has fared worse, plunging 7.2% in less than two months.

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Investors continued to supply obligations and binding to an unusual, rate funds as was the situation throughout the year.Strategic Outlook reports that money flowing into the bond fund is on pace exceeds $ 300 billion this year, exceeded only by record 350 billion dollars flowed in the last year.

U.s. Federal Reserve continues to reinvest billion in bonds of the Board, each month, to the interest is winning on the amount of the obligations that it bought last year his first tour of the quantitative easing.

It raises the question, what makes any sale that is driving down, providing that these are feeding the bond market one Awards overwhelming the purchase of nearly - an exuberant record for investors and the purchase continues the Federal Reserve?

It is central, as in China and the Japan, holders of such a large percentage of bonds United States banks? analysts are requested for a long time how these nations would never able to downsize or diversify their holdings to link U.S. without devastating on markets possibly selling the resistance being created by the unusual purchase of investors and the Federal Reserve us?

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