Posted by: jhamon | February 18, 2010

MysteryHedgie: Markets Vulnerable Here…

The Fed’s move post Thursday’s close strengthens our favored themes for 2010; the rallying US$ and importunate Government intervention elevating uncertainties. Ironic that the Chinese New Year holiday began with a surprise rate hike from Beijing and ends with one from Washington.

The elimination of shorts and hedges as February option expiration arrives leaves markets vulnerable. Should expected Chinese buying (see chart of Copper below, a big recent beneficiary, where $3.15 must hold) fail to materialize, markets will revisit February lows quickly. Reset tactical shorts and protect $ and rate sensitive themes (EM, commodities, financials, retail) with optionality. The Fed has provided a catalyst for the record wide US yield curve to begin flattening……

Copper: $3.13 Must Hold - Or Bust

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