A Bubble for Bonds?

Clearly, a low reading in the index put/call ratio is not to be ignored. Nor is a high reading in the International Securities Exchange call/put ratio. Keep in mind these are not sentiment surveys, they are reflections of what folks are actually doing with their money.

The good news about Monday's decline was that volume was relatively light and the number of stocks making new lows did not expand in a major way. But that's where the good news ends. Nasdaq relative to the S&P 500 was flat as they both fell fairly similar amounts and that type of action does not allow for the ratio to come down under 1.7.

Away from stocks, my inbox is filled with questions on bonds. I suppose we could say the move in U.S. Treasuries is unprecedented. But that term has been so overused lately I'm not quite sure it has the same head-turning indications it had just a few months ago. However, there has been a lot of chatter about whether or not the bonds are a bubble or not.

I'm not sure they are a bubble. In a bubble everyone believes in the reasons something is going up, and I see the bonds referred to as a bubble so often now that I wonder who it is that actually believes in bonds. So perhaps I'd call the bonds a blow-off more than a bubble at this point.

Now I don't keep the sentiment statistics for bonds but I glance at them in Barron's each week and I would note that the Market Vane Bullish Consensus on T-Bonds was 82% this past week, up from 68% just two weeks ago. That is quite a move. And that sentiment reading would have been for last week and, therefore, prior to the move in the latter part of the week and Monday.

Consensus Inc. shows a move from 44% to 58% for the bulls on bonds in that same period of time. Of course, one has been right to be bullish on bonds these last few weeks, but at 82% one would think it's getting a bit stretched. After all that means there are only 18% left to convert to bullishness!

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At the time of publication, Meisler had no positions in any stocks mentioned, although holdings can change at any time.

Helene Meisler writes a daily technical analysis column and TheStreet.com Top Stocks. For more information, click here. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback; click here to send her an email.