Look at the chart of EWP - I think that's all you need to know. "Fear money" is flying out of Europe and into Treasuries and the Yen (FXY). I don't know how much longer the Swiss (FXF) can hold out staying pegged to the Euro. I bought some OTM calls on FXF - if the Swiss rebalance it could go alot higher. (Or if there is any good news out of Europe.) (edit: I just came across this article on the Swiss): http://georgedorgan.livejournal.com/10650.html I think at this point the Euros need to act and come up with an FDIC, a plan for a country to leave the Euro, and a Euro bond. Any of those things will help the bank runs and restore some confidence in the Euro. They can afford to let Greece go, but they can't afford to let Spain end up in the toilet. Bund rates were 0% (2 yr) and Spanish rates were 6.5% ? That disparity can not continue using the same currency IMO. Imagine if Alabama bonds were 6.5% and North Dakota bonds were 0% - that's pretty much the same thing as going on in Europe between Spain/Germany. If Greece left the Euro tomorrow I think we'd all be better off instead of them pulling the bandage off over the rest of the year or into future years. I think the market is going to drift lower until the Greek elections - I've been selling end of the day rallies.
Economy weakening.....QE3 back on the table. This guarantees future inflation. This will support TBT.
I wouldn't expect QE until after the elections ... the Euro's house is burning ... it's their turn for LTRO (or something else.) Euro rebound should be good for TBT ~
Anyone who went long below 60 in July has done pretty well. However, this has not moved in a straight line at all. It hit nearly 70 back in Sept, and has backed off. I think the run-up is over.