Posted by: jhamon | January 27, 2010

MysteryHedgie: Waiting on the Fed…

Uncertainty resolutions…as we await the FOMC release (expectation of reiterated monetary accomodation), the vote on Bernanke, and Obama’s State of the Union Speech, markets are nervously moving to our downside targets proposed 1/21 (gold $1075, SPX 1085, EEM $39, $A .88).  How the markets react to these largely political events will dictate whether this is a dip to buy or the first leg in a larger “liquidity correction.”

Our inclination is to think that there is further downside but this view will require a clean break below SPX 1080, Euro 1.40, and gold $1075.  Ring the register on some of your profits, and focus on the yield curve (below) for clues as to the next  move…2/10 below 2.7% means lower prices and lack of faith in global governments’ ability to correctly manage rebalancing.  

Yield Curve The Tell...

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