We have been overwhelmingly bullish on bonds since the beginning of the year. The bet that has paid off big time thus far. While most market participants expect the rates to rise, we disagree with their view. Here is why…

1. Our mathematical and timing work predicts a severe bear market between 2014-2017  As it unfolds, it will push the US Economy into a severe recession.To avoid further collapse the FED will have no other choice but to introduce further stimulus into the economy. Driving the rates lower.
2. Based on our in depth study of financial markets, secular bull/bear markets rarely end in a V shape fashion. Typically, there are longer term double or triple bottoms/tops. Bond yields have been going down for 30 years. I continue to believe that it is wrong to assume that they will simply bottom in 2012-2013 to start their bull market. At least a double bottom is highly probable.

That double bottom should coincide with the recession discussed in point #1. In fact, I wouldn’t be surprised to see the 10-Year Note at around 1.5%. Making it one of the best investment opportunities in today’s market.

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The Shocking Truth Behind Bond Market Conundrum  Google

Talking Numbers: Think the bond rally is over? Think again.

Few things are weirder right now than the bond market.

The Federal Reserve continues to taper its bond-buying program as the official unemployment rate ticks down. That should mean higher interest rates.

But lots of other things are happening. For example, though the unemployment rate is at 6.3 percent, the labor participation rate is the worst it has been in over three decades. Tensions on the Ukraine-Russia border and data showing China’s manufacturing contracting have sent investors fleeing to the safety of U.S. bonds. That should mean lower interest rates.

This tug-of-war in the bond market has kept rates in a relatively tight range for much of the year. In fact, the yield on the benchmark U.S. 10-Year Treasury Note has stayed between 2.6 and 2.8 percent since February. It wasn’t long ago when a 20 basis-point move was just another humdrum week in the market.

While the 10-Year’s yield dipped below 2.6 percent briefly in the past couple of days, Chantico Global founder Gina Sanchez said, investors shouldn’t expect rates to stay this low indefinitely.

“I don’t think that we can really support going well below 2.6 percent,” said Sanchez, “only because bonds at these levels are really expensive.”

The only way for interest rates to go lower would be for economic expectations to sour, according to Sanchez, a CNBC contributor.

“That’s really not what’s happening,” Sanchez said. “Although it’s not a dramatic recovery, it is still a recovery. We are still seeing a fall in unemployment rates. There are still issues out there but we are actually seeing the consumer come back to life.  So, I think that it doesn’t make any sense to have rates down below here. I think that this is an anomaly and it’s a selling opportunity.”

However, Richard Ross, global technical strategist at Auerbach Grayson, says interest rates will be moving lower.

Ross notes the 10-Year has been trading as a “range within a range.” While it has stayed roughly between 2.6 and 2.8 for the past three months, the larger range has been between 2.5 and 3.0 percent over the course of nearly a year. Ross’ short-term chart of the 10-Year Treasury shows resistance at a yield around 2.72 percent, its 200-day moving average.

But on a longer-term chart, Ross sees rates as having made a “bearish double top” and headed down to test its 200-week moving average. “That comes in at around 2.40” percent, said Ross. “I am bearish on equities … and I think that plays right into bullish play on bonds, meaning prices go higher, rates move lower. Look for a test of that 2.40 [percent] to coincide with a bigger pullback in the equity market.”