MUB Municipal Muni Bonds Weekly and Daily Charts Sideways Channel H&S Muni Bond Bubble Rolling Over

The muni bonds topped out in the Fall where the rising wedge, overbot conditions and negative divergence created the smack down. The low in December helps establish a lower boundary for a sideways channel at 109.5. There has been much talk about muni's over the last couple years, the rally beginning 2011 is very impressive.  However, the party appears to have ended and it is time for the hangover to begin.

California law suits may create headaches in the bond world and highlight that muni's are not as safe an investment as expected. Muni's are a credit risk due to falling tax receipts and interest rate risk where yields are up and bond prices fall.  Warren Buffett, the large reinsurer, is no longer writing credit default swaps for the mini's which hints that the jig is up.  Buffett does not want to be on the line as the defaults increase. Municipalities may also want to perform 'strategic defaults' which will add a new negative twist to the game.

Keystone has been calling for this muni top and highlighting the action over the last year. Projection is for sideways to sideways lower prices moving forward as the air deflates out of the muni bubble. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.