Wow, crazy day. CHF was up 10 handles from the lows at one point! I am pretty sure that is capitulation. Bonds also had a crazy blowoff move and I would short them here if I did not already have plenty of 'risk-on' exposure. So, for the next few days I think the best approach is buy the dips, scale out into the rips. Long risk, and/or short safe haven trades. I still think we bounce back to 1225-1250 in the next week or so, but it'll probably be choppy with a few scary moments.
If I remember the last blow-off in bond prices, it was late 2008, when the 10 year briefly dropped under 2%. A good tell was bond prices failing to go higher despite equity prices continuing to get hammered for weeks. Certainly, a chart of bond prices looks like a major double-top has been put in. http://finviz.com/futures_charts.ashx?t=ZB&p=w1 Jeff Gundlach has been on the money for weeks, saying QE is inflationary, therefore you sell bonds on QE. The end of QE is deflationary, therefore you buy bonds when QE ends. Totally spot on call (and completely the opposite of what Bill Gross said). The world clearly has a new bond king.
I missed most of the post Fed action. So apparently GS saved the day and popped ES by some 70 points?
Yes, it does seem like the GS note I mentioned yesterday afternoon turned things around. ZH gets a lot of flak, but kudos to them for being the 1st to get that out there. Meanwhile in Europe, they're wearing shirts that say "U.S. shares jump 4% and all I got was this lousy T-shirt" Stoxx 50 now flat after popping 2.5% on the open. Germany is up 1.2% - pathetic bounce given the recent disappearing act of its stocks. Of course, the action won't really get going until U.S. shares open. I notice the SNB intervened again last night, but other than a little flurry of activity around 2:45 AM, it's hard to see any effect.
I suspected the Fed would not raise rates with 8% handle on the UR, it looks like I was too conservative. Their 2013 forecast is for a central tendency of 7% to 7.5%(Lets call is 7.25% for mid year but thats the old forecast, the new one might be 7.5% for mid 2013) and inflation at target(both headline and core) plus iexpectations stable Now, this is huge information that market participants tend to miss out(specially after many months have passed). The Fed just gave out their Taylor rule type calibration for situations where they will simply not raise rates, yet I'm pretty confident that down the line rate hike scares will come out even against the calibration the Fed has put out, which create profitable opportunities I made money fading the idea of 8% UR rate hikes but even that was wrong. The market simply doesn't have a clue of the calibration the Fed uses. If you look back in 2009/2010, you wouldn't believe that Type of hike expectations existed, I was positing almost every week on how insane the market was and how free money was to be long the fed futures. The free money now is over, now it ain't time to buy, but at some point it will be again
Good stuff Daal. You never know there could be another June 2008 type situation again where people get the weird idea that the Fed will tighten monetary policy.
posted here merely on a "for what it's worth" basis: http://twitter.com/#!/zerohedge/status/101271809571303424 Intesa down 8%, rumor of French downgrade
Time to bring back Kocherlakota historic speech http://www.rttnews.com/Content/AllEconomicNews.aspx?Node=B2&Id=1621301