US Treasury bonds - is conventional wisdom correct in calling them toast?

When the crowd finally understands why something like U.S. Treasury bonds and notes may not be a good investment, then it might be time for the contrarian to examine the other side of the trade or investment. By now, there seems to be good general understanding that the feds are being forced to issue vastly greater quantities of debt, and that the dire economic circumstances may cause the U.S. government to have some challenges - perceived or real - paying back that debt. Or at the very least, that interest rates may rise and the prices of U.S. Treasury bonds and notes may fall. Now that everyone "gets it," is it time to consider bullish potential in bonds? Let's take a look ... but first, I'll be the first to say that any significant rally (or even possible slight new high) in bonds is highly likely to be a great selling opportunity in this asset class.

I've posted before my thoughts about the long-term, big-picture view of U.S. bonds, including the idea that there's a long-term Fibonacci objective that's slightly above the highs already put in recently. You can find those thoughts, along with commentaries about the Elliott Wave views of bonds, in posts at this site with the label "bonds" (and sometimes under the exchange-traded fund (ETF) called "TLT"). Since that hasn't helped me develop a definitive opinion about whether to expect a new high from U.S. Treasury bond and 10-year note prices, or just a good rally, here I'll turn to Tony Caldaro's Objective Elliott Wave view as indicated in his 10-year Treasury note charts (in his public chart list, see Tony's site link at right side of this page). You can see on his weekly chart that he's expecting a "c" wave up in this big-picture look. You can also see that there isn't negative RSI divergence showing in his weekly chart - meaning that the indicators aren't saying that Treasury bonds/notes cannot push to new c-wave highs:


And here's his daily chart of the 10-year T-note. While there's a comment on it stating "bonds downtrending," that may be a relic referring to the drop from mid-December. Also I can see on this chart that when Tony was referring to bonds reaching his target, that the drop earlier this month was to the support level of the previous consolidation high of mid-September 2008. I cannot believe that the "downtrending" comment still applies, because his labeling on the chart indicates that he expects that "c" wave upward. And the indicators on his daily chart are consistent with bonds being able to move upward:

Then there's the Commitment of Traders (COT) chart showing the net positions of commercial traders (usually called "smart money"), large speculators and small speculators. These charts come out each Friday afternoon showing data as of the previous Tuesday (in this case, Feb. 17). You can see that the large commercial traders remain rather net long Treasury bonds: