NFP weaker than expected at 100k jobs added, Dow
sold off, currently at 11639.
Market looks technically weaker like it wants to
retest 11400's.
Dollar sold off on result , but regained
strength after weaker than expected Euro Zone
data.
Eur/Usd at 12912 at present.
Alcoa earnings due today. Key will be to
see what dynamic is, whether the dollar moves
with the Dow or regains the stronger negative
correlation seen after qe2 began to be priced in.
Monday, 10 January 2011
Thursday, 6 January 2011
NFP-Stay long the dow-Time to Buy the Dollar again?
Once again, a brief post.
Quotes:
Dow 11697
EUR/USD 12999
GBP/USD 15467
USD Index 80.85
Crude 8814
US 2Yr 0.66
US 10Yr
Gold 1371
Key resistance for EUR/USD 1295, having just broken 13000, the common reaction, everyone goes short, and it pops back, same as in November. However having already tested 12990 in Nov, a strong NFP, and continuing fears over the Eurozone situation, with yields on Spanish, Irish and Portuguese bonds rising, it seems the odds favour a break below 12950, initially to 12750, and then long awaited retest of 1.25 from earlier in 2010.
Consensus for NFP is 150K added. Even significant underperformance of this result, say 50K added, any sell off in the dow (a sell off of more than 75 points is unlikely in my opinion), however any sell off such that the Dow does not break below 11300 is a buy, with earnings season due to start (and in my opinion once again likely to outperform estimates.
Potential risks are that the ratio of bulls to bears at present is significantly high, which usually does call for a pullback, however with Q4 earnings on the horizon, I must remain bullish.
Seeing the Dollars reaction to NFP, a break of th eindex above 81, is likely to be a buy, I would start to accumulate, and if the Dollar does continue to rally with the dow into earnings season, then I would take this as a significant indication of the trend to continue into the year, and look to add to my position.
I see the potential for Gold to be shorted into this result, to target 1330 by close, as many who placed longs in the 1400 region earlier this week, will be forced to close out their positions as the dollar rallies.
Quotes:
Dow 11697
EUR/USD 12999
GBP/USD 15467
USD Index 80.85
Crude 8814
US 2Yr 0.66
US 10Yr
Gold 1371
Key resistance for EUR/USD 1295, having just broken 13000, the common reaction, everyone goes short, and it pops back, same as in November. However having already tested 12990 in Nov, a strong NFP, and continuing fears over the Eurozone situation, with yields on Spanish, Irish and Portuguese bonds rising, it seems the odds favour a break below 12950, initially to 12750, and then long awaited retest of 1.25 from earlier in 2010.
Consensus for NFP is 150K added. Even significant underperformance of this result, say 50K added, any sell off in the dow (a sell off of more than 75 points is unlikely in my opinion), however any sell off such that the Dow does not break below 11300 is a buy, with earnings season due to start (and in my opinion once again likely to outperform estimates.
Potential risks are that the ratio of bulls to bears at present is significantly high, which usually does call for a pullback, however with Q4 earnings on the horizon, I must remain bullish.
Seeing the Dollars reaction to NFP, a break of th eindex above 81, is likely to be a buy, I would start to accumulate, and if the Dollar does continue to rally with the dow into earnings season, then I would take this as a significant indication of the trend to continue into the year, and look to add to my position.
I see the potential for Gold to be shorted into this result, to target 1330 by close, as many who placed longs in the 1400 region earlier this week, will be forced to close out their positions as the dollar rallies.
Tuesday, 4 January 2011
Stay long
FTSE 6011
Dow 11676
Eurusd 13398
Ok firstly let me apologize for the brevity of this post.
Markets opened well today ftse up over 100 pts.
Trades:
long ftse at 6011 stop 5770 target 6400
duration 2-3 weeks
exit conditions: eurozone debt news takes prominence.
Although this is unlikely with earnings set to come out
and beat estimates in my opinion.
What I'm looking for:
seems the dollar will be sold as traders long the
dow, looking for eurusd to break above 13500 for
confirmation. Cable at 15600 pending performance today
may be looking for 16000.
Yield curve: will be looking for the curve to steepen as inflation
expectations rise, while short end up to 2yr yields to move up less
as supported by fed buying.
Usd/jpy may be a good technical long to support a short
eur/usd position.
Dow 11676
Eurusd 13398
Ok firstly let me apologize for the brevity of this post.
Markets opened well today ftse up over 100 pts.
Trades:
long ftse at 6011 stop 5770 target 6400
duration 2-3 weeks
exit conditions: eurozone debt news takes prominence.
Although this is unlikely with earnings set to come out
and beat estimates in my opinion.
What I'm looking for:
seems the dollar will be sold as traders long the
dow, looking for eurusd to break above 13500 for
confirmation. Cable at 15600 pending performance today
may be looking for 16000.
Yield curve: will be looking for the curve to steepen as inflation
expectations rise, while short end up to 2yr yields to move up less
as supported by fed buying.
Usd/jpy may be a good technical long to support a short
eur/usd position.
Tuesday, 28 December 2010
2011-Long the Dow
US 2 Yr yields today reached 0.75. Seems the market is inclined to follow the footsteps of the QE1 trade, stocks up, treasuries down? And what of the Dollar? Will the dollar be sold as the Dow is bought?
Quotes:
Dow 11562
FTSE 5973
GBP/USD 15364
EUR/USD 13106
Gold 1405
Silver 30.23
Crude 9125
US 10 YR 3.49
US 2 YR 0.75
USD/JPY 83.74
USD Index 80.4
Treasury auctions today attracted the weakest demand in 6 months, with a bid to cover ratio of 2.61. So are Treasury's a buy or a sell right now? Depends on your timeframe. From what I have read it seems likely that in March, with $700 Billion of debt willl require restructuring from the likes of Portugal, Spain, and Belgium, so the typical buy treasury's safe haven scenario as we have seen with Greece and Ireland is likely to play out again. I think it unlikely that the 2010 lows reached by the 10yr and 2 yr alike would be likely to be breached.
Further bad came from US home prices declining more than expected.
Ok so I have been trying to figure out whether it's inflation or deflation, whether the 20 yr bull market in bonds has come to an end? And having read extensively over the arguements on either side. Here are my findings;
The central tenet of the deflation arguement, in the US, is that there is 54 Trillion USD of outstanding debt, the ratio private sector debt to GDP is at record levels. The arguement is that the sheer weight of this debt, and the addition of private sector deleveraging, and the destruction it has on money supply (i.e. the lack of additional loan creation which increases the supply via fractional reserve banking) means deflation will be the driving force.
Now this is a strong arguement, one that has some similarities to the Japanese deflation era (however the savins rate in Japan is much higher, and also the population demographic is rather different), and despite years of money printing/quanttiative easing Japan has not managed to escape these "deflationary" forces.
The premise of the arguement for inflation, is essentially unprovable, in quantitative means. It's more of a proof by historical reference, whereby the majority of times money has been printed to such an extent, when the economy recovered, money veolcity picked up, the excess reserves flowed out, and inflation soared. As you can see with commodities reaching record highs, gold at $1400, Silver at $30, the market does not believe Ben Bernanke will be able to act accordingly to put inflation back into it's place. Given the oustanding debt and weak housing market, does he have the capacity to raise rates?
Neither of these arguement's really governs my outlook. Essentially my base case for 2011 is that the Dow will continue to rise. Corporate earnings will continue to outperform, and beat estimates. This is a bull market, and the consensus that inflation, or deflation, Bernanke will continue to print to accomodate the market, means, in my opinion, that the Dow is likely to continue to trend upwards and perhaps even make new highs in 2011.
Given this, and given the nature of the market dynamic in 2009, I think it is likely that traders will stick to a similar script of yields moving higher. Eurozone issues are likely to provide opportunities to buy into the Dow and to sell treasuries as risk comes back in after the moments of panic. Now, what of the Dollar?
Surely it is too early, even with earnings season coming up, and the likelihood of the Dow to conintue upwards to 12,000, surely it is too soon for the market to price in interest rate increases (by the Fed). I would be observant of how in the ocming weeks the dollar trades, with respect to the rising Dow, to decide at which point it is favourable to begin longing the dollar as part of a possible move up to 90 and beyond, on the dollar index. However, with Eurozone issues likely to take a backstage as earnings news comes in, we will have to see whether the dollar will be rallying with the dow, or selling off with it to observe what the correct trade will be.
Quotes:
Dow 11562
FTSE 5973
GBP/USD 15364
EUR/USD 13106
Gold 1405
Silver 30.23
Crude 9125
US 10 YR 3.49
US 2 YR 0.75
USD/JPY 83.74
USD Index 80.4
Treasury auctions today attracted the weakest demand in 6 months, with a bid to cover ratio of 2.61. So are Treasury's a buy or a sell right now? Depends on your timeframe. From what I have read it seems likely that in March, with $700 Billion of debt willl require restructuring from the likes of Portugal, Spain, and Belgium, so the typical buy treasury's safe haven scenario as we have seen with Greece and Ireland is likely to play out again. I think it unlikely that the 2010 lows reached by the 10yr and 2 yr alike would be likely to be breached.
Further bad came from US home prices declining more than expected.
Ok so I have been trying to figure out whether it's inflation or deflation, whether the 20 yr bull market in bonds has come to an end? And having read extensively over the arguements on either side. Here are my findings;
The central tenet of the deflation arguement, in the US, is that there is 54 Trillion USD of outstanding debt, the ratio private sector debt to GDP is at record levels. The arguement is that the sheer weight of this debt, and the addition of private sector deleveraging, and the destruction it has on money supply (i.e. the lack of additional loan creation which increases the supply via fractional reserve banking) means deflation will be the driving force.
Now this is a strong arguement, one that has some similarities to the Japanese deflation era (however the savins rate in Japan is much higher, and also the population demographic is rather different), and despite years of money printing/quanttiative easing Japan has not managed to escape these "deflationary" forces.
The premise of the arguement for inflation, is essentially unprovable, in quantitative means. It's more of a proof by historical reference, whereby the majority of times money has been printed to such an extent, when the economy recovered, money veolcity picked up, the excess reserves flowed out, and inflation soared. As you can see with commodities reaching record highs, gold at $1400, Silver at $30, the market does not believe Ben Bernanke will be able to act accordingly to put inflation back into it's place. Given the oustanding debt and weak housing market, does he have the capacity to raise rates?
Neither of these arguement's really governs my outlook. Essentially my base case for 2011 is that the Dow will continue to rise. Corporate earnings will continue to outperform, and beat estimates. This is a bull market, and the consensus that inflation, or deflation, Bernanke will continue to print to accomodate the market, means, in my opinion, that the Dow is likely to continue to trend upwards and perhaps even make new highs in 2011.
Given this, and given the nature of the market dynamic in 2009, I think it is likely that traders will stick to a similar script of yields moving higher. Eurozone issues are likely to provide opportunities to buy into the Dow and to sell treasuries as risk comes back in after the moments of panic. Now, what of the Dollar?
Surely it is too early, even with earnings season coming up, and the likelihood of the Dow to conintue upwards to 12,000, surely it is too soon for the market to price in interest rate increases (by the Fed). I would be observant of how in the ocming weeks the dollar trades, with respect to the rising Dow, to decide at which point it is favourable to begin longing the dollar as part of a possible move up to 90 and beyond, on the dollar index. However, with Eurozone issues likely to take a backstage as earnings news comes in, we will have to see whether the dollar will be rallying with the dow, or selling off with it to observe what the correct trade will be.
Tuesday, 16 November 2010
US Dollar!!
Quotes:
FTSE 5668
Dow 11020
EUR/USD 13485
GBP/USD 15879
Gold 1339
Silver 25.37
Crude 83.11
Xstrata
Everyone was bearish on the Dollar.I myself was beginning to think it was over for the dollar?! The technicals set themselves up, as the dollar held its support trend line from december 2009, then came better than expected economic indicators, worse than expected earnings from Cisco last week (bringing the dow lower), markets fearing another rate rise by China to curb inflation, fears over Irish debt repayments, a revision of outstanding Greek Debt. What more could you want for reasons to buy the Dollar?
So I bought the Powershares DB US Dollar Fund on Friday (and added to the position today), and today shorted Eur/USD (at 13513) and GBP/USD (at 15901) as shown above.
Having reached my anticipated level of 0.36% yield on the US 2 Yr, from my prior recommendation, I will be looking to see how the 2 yr trades, yield currently at 0.5%, and will be monitoring it for the possibility of further long positions.
Mervyn King has revised up forecasted CPI for mid 2011 to reach 3.5%, before later falling back to the 2% target, with remaining slack of high unemployment to be the driver of this. Regardless, I see the Pound as a strong currency, with our fiscal austerity measures, and CPI above what most economists anticipated, indicates the recovery in Britain is stronger than in the US, and potential for interest rate rises to be priced in by the market at some stage next year, are higher (not that I think those rate rises will come). So why am I short? Well, with the Euro crisis taking centre stage again, market sentiment is likely to favour the Dollar, and despite the UK being likley to maintain its credit rating, and not be too greatly affected by Bank holdings of Irish Debt (this year at least), fears of contagion due to trade relations and proximity are likely to take hold.
I am short the Pound in the short term, to target 1.55, and perhaps lower. However will most likely look to go long at osme point in 2011.
Trade Ideas
existing positions:
EUR/USD
I am contuing to hold my short EUR/USD position, to target 13400 in the short term (this week), and 13000 thereafter. Ideally I am looking to hold til 1.2 within the next couple of months.
Short EUR/USD 13513 Stop 13613 Target 1.34 in next 2 days, 13000 in next 2 weeks.
Stop is tight as risks are Ireland accepting a bailout, and market suddenly short covering, taking it to 1.38 and so on. However I would look to take on a new hsort position at this point most probably.
GBP/USD; short at 15901, Stop 16001, Target 15700 in the coming week, 15500 beyond.
Powershares DB US Dollar Fund; Opening 2270, stop 2230. Taget 2600.
Potential new trades:
1)What else? I am looking to go short the Dow, to target 10700, and the Ftse to target 5300. However I think there is the risk of sharp reversal in the Dow back to 11200 zone, given the trend of US indicators outperforming, and possible decoupling from the Eurozone news as well as divergence from the negative correlation with the Dollar, so it would have to be a close below 11,00. I have decided against it for now, however if the right expected risk/ reward presents itself, it may be a good opportunity.
2) gold at 1338, taken a beating since closing below 1370 on Friday with fears of the slowdown in China (with rate rises) and the upturn in the dollar affecting all commodities. Silver down from its high of $30, trading at $25.37 currently.
Potential trade;
Short Silver 24.90, stop 25.20, target 24.00
To combine with a small long position in Gold (as despite dollar strength, and bearish technicals, upside in gold is possibleon safe haven buying from EuroFears, perhaps that is why it traded back up from 1330, to 1340 in the latter part of the US market)
Long Gold at what I expect would be around 1320, 20 point stop, let it run as long as the Silver position is open. Good profit taking opportunites would be 1350-1360.
3)Long USD/JPY, having broken out of its wedge, and broken the 50 day moving average. USD/JPY at 8330 does look to be targeting 8500/8600. However the move up has not been as sharp as I would like, so I am keeping it on my wathclist for now.
4) xstrata at 13.11, a possible short if it breaks 13, to target 12, and possibly beyond to 11.50. to hedge myself against an upturn in commodities, and also play the fears in the Eurozone, I would combine this with a long gold position.
Short XTA at 12.97, Stop at 13.14, target 12
Long Gold 1339, Stop at 1315, Target 1350
I would weight the short Xta as twice the size of the gold position however, as I find the the probability of the gold rally less likely at this stage I feel.
Sunday, 3 October 2010
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.
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.
Sunday, 26 September 2010
Stay Long--GDP figures due this week-buy any sell off?
Stay Long gold, Stay long the Dow.
Quotes:
Dow 10900!
FTSE 5637
eur/usd 13477
gbp/usd 158277
Xstrata 1235!!
Gold 1295!
Gold currently at 1295, having touched 1300 briefly on Friday, the Dow currently at 10900, to target 11000 tomorrow, or Tuesday.
Stay long gold, currently at 1295, Stop at 1270, Target 1330.
GBP/USD currently at 15828, to target 16000. Trade: Buy 15828, stop 15700, target 16000.
Stay long the Dow, having opened at 1040, currently at 10890, I think an ideal place to look to add to your long would be around 10830 or 10802, on any minor sell off, With a 10700 stop, target 11200, to hold for 1-2 weeks.
The hedge:
This is how I am going to hedge my beta risk. Short Crude, currently at 7680, stop at 7727, open trade, no limit.
Market brief overview:
Why is the market rallying? The question it seems should perhaps more be alligned to why has the market been ranging since May? No matter how bearish the news has been, the Dow has been supported at the 9700 level. Having broken resistance at 10400, and now 10840 next stop is 11200.
Following a GS conference call the suggestion is that further QE is likely, from Bernankes recent statements, and that announcement of this will not take place til Novemeber.
Regardless, this is what I'm looking at. The big question everyone is asking is deflation or inflation?
Arguements for inflation: QE, money printing, commodity prices go up, stocks supported by low rates environment (as high unemployment make it impossible for anything more than a trivial 0.25 rate increase in near future).
Recent rally in Gold , Silver (at 21.40, reaching a 30 yr high)seem to imply that this is the favoured view.
Arguements for deflation: The private sector is still deleveraging, loss in notional from US house prices greatly outweighs supply of dollars from QE, 30 yr bond market bull trend still in tact, hence long dollar short stocks short commodities.
US 10 yr yield at 2.60%, is this a shorting opportunity?
Regardless of the "fundamentals", if the yield on 10 yr US Treasury's (currently at 2.60%) does not break below the lows of 2008 (around 2.08%) and manages to form a break out here, I will be backing the inflation trade. If they break below I will be backing deflation. As I am of the opinion that it is a critical juncture.
However inflation or deflation, Gold had rallied during deflation in the 1930's, as well as inflation/stagflation during the 70's. More importantly a negative real interest rate environemtn such as that at present is likely to support Gold.
US GDP due for release on Thursday, market likely to anticipate poor results, and sell off 50-60 points before release, I would be looking to go long the result, as well as long any sell off in the case off a worse than expected result.
Quotes:
Dow 10900!
FTSE 5637
eur/usd 13477
gbp/usd 158277
Xstrata 1235!!
Gold 1295!
Gold currently at 1295, having touched 1300 briefly on Friday, the Dow currently at 10900, to target 11000 tomorrow, or Tuesday.
Stay long gold, currently at 1295, Stop at 1270, Target 1330.
GBP/USD currently at 15828, to target 16000. Trade: Buy 15828, stop 15700, target 16000.
Stay long the Dow, having opened at 1040, currently at 10890, I think an ideal place to look to add to your long would be around 10830 or 10802, on any minor sell off, With a 10700 stop, target 11200, to hold for 1-2 weeks.
The hedge:
This is how I am going to hedge my beta risk. Short Crude, currently at 7680, stop at 7727, open trade, no limit.
Market brief overview:
Why is the market rallying? The question it seems should perhaps more be alligned to why has the market been ranging since May? No matter how bearish the news has been, the Dow has been supported at the 9700 level. Having broken resistance at 10400, and now 10840 next stop is 11200.
Following a GS conference call the suggestion is that further QE is likely, from Bernankes recent statements, and that announcement of this will not take place til Novemeber.
Regardless, this is what I'm looking at. The big question everyone is asking is deflation or inflation?
Arguements for inflation: QE, money printing, commodity prices go up, stocks supported by low rates environment (as high unemployment make it impossible for anything more than a trivial 0.25 rate increase in near future).
Recent rally in Gold , Silver (at 21.40, reaching a 30 yr high)seem to imply that this is the favoured view.
Arguements for deflation: The private sector is still deleveraging, loss in notional from US house prices greatly outweighs supply of dollars from QE, 30 yr bond market bull trend still in tact, hence long dollar short stocks short commodities.
US 10 yr yield at 2.60%, is this a shorting opportunity?
Regardless of the "fundamentals", if the yield on 10 yr US Treasury's (currently at 2.60%) does not break below the lows of 2008 (around 2.08%) and manages to form a break out here, I will be backing the inflation trade. If they break below I will be backing deflation. As I am of the opinion that it is a critical juncture.
However inflation or deflation, Gold had rallied during deflation in the 1930's, as well as inflation/stagflation during the 70's. More importantly a negative real interest rate environemtn such as that at present is likely to support Gold.
US GDP due for release on Thursday, market likely to anticipate poor results, and sell off 50-60 points before release, I would be looking to go long the result, as well as long any sell off in the case off a worse than expected result.
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