next year that resistance I marked should fail leading to a 10 handle rally in bonds or 4% on the 10 year. But between now and then we have another illusory market, where things normalize. edit: we will be in the midst of fed easing next year, so very easy for bonds to rally in that atmosphere.
I expect to see a wave of spot-buys against that downside vol from last week. High probability of a 500bp vol crush this week, as well as a short-covering/delta-hedge to convert those garbage puts into synthetic straddles. Target of SPX 1490 and then the bear-resumes.
I'll tell ya Spectre, I don't discount things getting so bad by year end that Bonds do something like trade from 110 down to 98 starting now and then rally 15 handles out of there on the renewed flight to quality, Fed easing stuff that the equity/housing calamity is sure to bring. Much depends on the dollar. I see the dollar firming and that'll give the Fed room to cut. You made some deflation comments a few weeks back that I dug. I'm in the inflation camp but I'm not married to the idea of higher commodity prices. A global slowdown should tank energies, metals and food. I think the life fractal is the 70's. There will be plenty of ying and yang to go around........
the only difference, in that fractal is that select technology sectors will outperform the market. I'm looking at the Naz-Spooz spread, and its behaving well even in this climate. certain technology components will become staple sectors similar to utilities, food and health/drug sector. I'm worried that the drug sector will fall victim to politics with candidates petitioning for lower drug prices, or pandering to public concerns.
the naz is pretty much out of focus, and most everyone seems to be focused on the spooz. It bodes well for that index, since its not in the limelight.
There's a big part of me that thinks stocks can't break for keeps until NDX trades 2400.... One of the coolest Index events in history was the Dow topping in Jan/00 while NQ caught a bid off that early year break and EXPLODED into new highs. You sir see the trade of the future. Or is it upon us as we speak?
with the election, you can bet that the liquidity gates will be left wide open. I was watching CNBC Asia a few minutes ago, and the korean administration that was in power was calling the trading houses recommending them to buy equities a few weeks back to maintain the positive sentiment so they could get re-elected. I'm sure similar things happen in the US, but behind closed doors.