Posted by: jhamon | January 21, 2010

MysteryHedgie: “Mother’s Milk” of Last 9 Months

The break of SPX 1130 (as there was one seller of 200k E-mini S&P futures) accompanied by a quiet flattening of the US 2/10 yield curve as well as gold’s break below $1100 (we mentioned yesterday that we expect $1075 very shortly) require adopting a defensive posture, as the expansion in volatility is likely to make the macro correction a “tradable setback”…

Stay defensive toward targets of SPX 1085, EEM $39, $A .88; to be reevaluated as targets are approached and largely dependent on the yield curve holding support at 2.7% 10’s over 2’s.  The market is currently viewing China’s overheating, the Massachusetts election, and Obama’s imminent proposals to reduce bank risk taking as liquidity withdrawal events; liquidity has been the mother’s milk of the past 9 months…

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