One of the reasons that I prefer trading treasuries above all other futures contracts is that sharp reversals aren't the norm. Obviously, that is not always the case, as this chart shows. This chart pattern has manifested itself just minutes following my last one.One person I know who works on the floor of the Chicago bond pits reported to me that many of the hedge funds and large bond mutual funds are liquidating long positions in bonds, and have been since the peak a few weeks ago. Thus, in a downtrend, we should expect that strong heaves of buying may be met with even stronger spasms of selling as those dry heaves run out of steam. Still, I am very aware of the power of the Fed to move markets, so their threat to intervene and buy long-term treasuries is always something I try to keep in mind. One of the rules I live by, as a trader, is this one: "Don't fight the Fed."
