|  Will There Be a Wave of Muni Selling Coming Soon?
by: Dan Stewart
I know I sound like a broken record, but the markets are overbought. Probabilities lean toward a pullback. Especially if earnings continue to come in as weak and mixed as they have been thus far. The midterm is thus far still intact and the advance/decline lines are still trending upward and haven't rolled over. This is always a good, early indicator of a market tops. The advance/decline line will rollover before the actual indices do.
Switching gears, one area of big concern is the municipal bond sector. Detroit formally declared bankruptcy yesterday. The largest municipal bankruptcy in history. Moody's just downgraded Chicago due to the high pension liabilities. And there almost 20 cities in California considering following Stockton's example of bankruptcy.
When interest rates rose the past 2 months, the muni bond sector declined 9%. They have recouped about 1/2 of those losses as interest rates eased. But as interest rates continue to trend upwards, munis will come under continued pressure.
If you want bonds, I would focus on...
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