Congratulation to Mr. Liu for his 2010 Nobel Peace Prize, who is still in prison in China.
He courageously negotiated with advancing troops for the safe withdraw of students from Tiananmen Square in the early hours on June 4th, 1989. In 2009, he was sentenced to jail due to his involvement of Charter 08.
As expected in the last post, it reached the resistance level and came down in a big way.
Dow Jones Industrials has completed another leg of up trend building since last pullback to 8100.
Current resistance at 9600 has not been broken. A pullback to 8800 is likely if it fails to break out 9600.
However, if 9600 is taken out, the next resistance is 10,750!
Here we took a look at one of Vanguard Bond Funds: VFSTX. Yield 4.41%; YTD return 10%; investment grade corporate bonds; average maturity 2.6 yr.
It suffered a 10% drop in price in 2008. The actual return was -5%, which was big in short term investment grade bond fund.
What was the cause of that big drop? Client redemption? Maybe considering credit crisis occurred last year. A few bond holdings went under? Maybe too. Had it owned Lehman Brother, for example.
It’s quite interesting that it has a unusual V-shape recovery after the drop. Obviously the relative higher yield has been attracting a lot of investors looking for better returns on their short term investment. Has it also attracted a lot of people who are basically using it as money market funds? Maybe.
Another reason for the recovery might be the valuation of its certain holdings has recovered since the credit crisis.
For comparison, here’s Fidelity FBNDX chart, which showed similar drop last year.
If you have owned similar fund, you probably want to pay closer attention to its price movement.
It’s down more than 180 points. If the current uptrend line is broken, the first support is at 8000-8100 level, which could become a good base to build some long positions if the worst is over. Let’s watch closely as overall it’s oversold at this point. The V shape bounce needs some time to consolidate even we’re entering a new uptrend.
The next support is 7500, which is previous low before this last leg down.
