I know that the GMI and GMI-R are still at their maximum levels and I should keep my long positions. But the technicals of the municipal bond ETF’s I reviewed earlier this week are so weak that I am acting to protect my gains achieved over the past few months. I have sold out most of my long positions in my trading IRA and bought some calls on TYP, in case the tech stocks break down. I am also considering buying puts on AGO, an insurer of municipal bonds. If I am wrong and the market continues to climb, I will get back in. I do not have to be fully invested all of the time. The huge deficits of the states and local governments scare me.
To be honest I am not sure we are in for a massive correction. When you posted on the Banks in 2008, the market(sp500) had been going down for 6 months already -18%. Now the market is going up.
However Worries about state and local government debt continue to drive money out of municipal bond funds. muni bond funds incurred $2.4 billion worth of outflows last week. This was the 10th consecutive week of outflows. Since the week of November 10, cumulative outflows have exceeded $25 billion
Municipal bonds vary greatly. Even within a particular state, there can be big differences in the credit quality of municipal bonds.
There si also too many news letters, and analysts looking for this correction being Inevitable, most of them pointing to the investor sentiment survey, and alot of them I consider good analysts.
So I am inclined to go on the long side, but I am prepared to be wrong. Thanks for sharing your knowledge, it is much appreciated.
Most importantly is the worries over inflation. The yields on lonterm treasuries are going up like munis yields are rising, so its not necessarilly just a muni story. It seems to be an inflation fear.