US 2 Yr all time low yields!! BUY BUY BUY?

US GDP beter than expected figures on Thursday helped push the market from 10850 to 10934, and selling off thereafter.

Dow 10833
FTSE 5611
EUR/USD 13803 (stay long, target 1.4)
GBP/USD 15796
USD/JPY 8327
Gold 1319!
Crude 8173
Xstrata 1242!! (I advise selling half of position from 1120, to target 1300)


Gold continuing to make ground on fears of further easing and currency debasement, stay long, 1330 likely to be breached next week, next stop 1350. unless China crashes next week, this trade is good to keep going.

Seems that everyone has caught onto the idea that the US is aiming for a weak dollar and high inflation to allow it to pay off its debts. However this being the sentiment, and we must trade sentiment and price, please bear in mind any reversal in the Eurozone situation, as well as the reality of the decline in notional of US dollars since the crisis (as per the Hugh Hendry arguement), mean a sharp reversal in the dollar is possible at any time.


US treasury yields are at all time lows, and I am now positioning myself to go long. I like to pay top price for my bonds. With Non Farm Pay Rolls due for release on Friday, I think this provides an exciting opportunity to come into the market, if you are not already.
Why are treasury's, stocks and commodities rallying all at once? Stocks and commodities from the sweet spot easy money trade, as per March 2009.

Treasury's? From the latest FOMC statements, the weakness of the recovery and the Fed's commitment to help stimulate growth, have lead to the consensuvs view that further bond purchases are in store. The consensus view seems to be that with further asset purchases from the FED deemed likely strong demand is coming from Japan, as the markets see tell tale signs of entry into a deflationary era.

The real question is CAN THE FED CREATE INFLATION?
Commodities and gold traders clearly think they can, and that they won't be able to control it. The bond market thinks that they cant, and the US goes into deflation.

The risks to the gold trade are that a sharp shock in the markets, triggered by a debt default in Europe or a crash in China (as anticipated by Chanos) could cause large scale derisking, in a similar fashion to the Dubai debt news in december 2009.

Although the Jim Rogers arguement for commodities being a good place to go in inflation, or deflation, as money has to go somewhere, I think the commodities trade is an inflation, currency debasement story, and will trade according to that.


Why am I long US Treasury's:
Outs. I like a trade which gives me outs. Yields at all time lows, so a new high in price has been achieved. There will have been numerous traders, Nassim Taleb and the likes, short treasuries since early Q1, "I recommend everyone in the world to be short US Treasury's".
Alot of people, will still be short perceiving the weakness in the dollar to precipitate fears of US default. But this will not come to pass, not yet.



With the dollar weak, what will happen to yields on the 2 yr if news of greece defaulting, or further eurozone fears come out......Hence I am long.

Non Farm Pay rolls:

The Dow seems to have found 10840 difficult to hold. I would estimate 30% probability of a pull back to support at 10500, however regardless I have no position at the moment. Depending on market dynamics on Thursday, with possibly a weaker than expected initial jobless claims result, I will be looking to position myself short prior to this, and into the release on Friday.

If the Non Farm payrolls result is worse than expected I am looking for the Dow to sell off 100-150 points, AND THEN to rise, as traders price in a greater probability of further QE and so buy the easy money market.


trading strategies;

stay long gold, short dollar (as per last week)

long us 2 yr, I will consider stopping the trade if yields break above 0.46% depending on the reasons behind the move, with yields currently at 0.42. This is a medium term trade. "epic bull markets usually go out with a bang".

Long the dow, Short te FTSE towards latter end of week, with jobless claims and payrolls due. As a poor payrolls number likely to be indicative of further QE, I see mediumt erm gains in the Dow to be greater than those of the FTSE (with further QE in the UK less likely to be acceptable within current UK austerity program). More details to follow.