Unfortunately for the Fed, bond traders are not being particularly cooperative today as they are slamming the long bond lower, particularly as they digest the day's FOMC statement which repeated, once again, the committee's intent on keeping short term rates extremely low until late in 2014!
Money is thus fleeing out of the longer term Treasury market and plowing into stocks as investors are all gleefully leaping onto the equity bull train before it leaves the station without them. With extremely low yields as far as the eye can see and the Central Banks papering over all that ails the global economy, traders are being herded into stocks, which is exactly where the monetary authorities want them to be!
Money has also been flowing out of the gold market today as safe haven trades involving gold are being taken off as well. Apparently the theme today is "GO FOR THE GROWTH". Copper is certainly acting as if traders are convinced the global economy is back on its feet and blue skies lie ahead.
I should note that the Dollar is moving higher today not based on the risk aversion trades (the Japanese Yen is getting blasted lower which would not be the case if the risk aversion trades were back on) but rather on the idea that the US economy is going to be stronger than Euroland or Japan.
The bond breakdown is extremely significant in my opinion. A while ago I posted a MONTHLY CHART of the LONG BOND detailing some technical action. I am reposting that same chart with the current action now charted. Whether the monetary authorities like it or not, long term interest rates have begun rising. If they close the week out below the technical support levels noted, momentum players will begin taking on short positions in an attempt to drive the bonds even lower. There are an awful lot of players on the LONG SIDE of the bond market who have been counting on the Fed to put a floor in this market. It is going to be one nifty trick for the monetary masters to keep the equities soaring higher and preventing the bonds from falling apart.
One last chart - yes, you did just dream that the US underwent a credit crisis - relax - everything that led to that has been fixed!
Dear Trader Dan,
ReplyDeletePerhaps someone will teach these guys what an earnings yield is, and why higher interest rates (bonds) and a bull market in stocks do not always work out well.
I think that Jim Sinclair is going to be right concerning extremely volatile markets, as traders keep readjusting to new information contradicting what was just "baked in the cake".
After a day like today, with JP Morgan - I say no more.
"One small step for man, one giant step for Mankind." Where is your pride America?
Yet again I need to point to the action in the better performing miners of late.
ReplyDeleteCheck out the intraday chart of GG and SLW. After all the chaos and destruction of the paper gold market, SLW was down 11 cents and GG down .47 cents from the time of the FOMC release until the close of trading., with GLD down about 2 points and SLV down 30 cents.
The fact that the miners and silver have outperformed gold in the volatile final 2 hours of the NYSE trading is interesting, as a falling gold/silver ratio is generally a good thing.
Copper and platinum look even better.