The spiral does not tell the market what to do, it just follows
it. So, 1363 level in 9 weeks does not mean that we will
actually get there. However, if the market decides to rally
all the way, that's where we'll go.
In my view, these markets are heavily manipulated by the
Fed, which increases the chances that the next move down will
start with a crash. Coupon passes occur during options
expiration. The threats this time were
1) A very sharp decline of the dollar during April
2) Very sharp rally in bond yields
3) Parabolic rally in commodities
During the past two weeks there has been an
operation to save these, which, as far
as I see now, has worked perfectly to the benefit of
the banks and the Fed. Long bond yields declined a lot,
the dollar bounced, gold dropped $100. However, if
stock rally takes hold, I would expect gold to be resurrected
like a zombie you can't kill. Nobody can manipulate the
dollar and the bonds, not even the Fed.
The blah-blah and rumors of 50bp hike have saved the bonds
and the dollar, and hurt stocks and gold. For now, they
achieved what they wanted without actually hiking - stocks
were not hurt nearly as much as commodities. However,
if they pause or cut during June meeting, I expect the Fed's
credibility to be hurt further, which could send the dollar
and bonds off a cliff, this time taking stocks along for the
ride... Won't happen until June meeting. |
