OK. There was a little sell-off in equities last Friday, but the story is currently written somewhere else: in the Bond market. Maybe there is something I don’t get since I’m just a rocket scientist, but shouldn’t Bond yields fall when the FED is buying aggressively? By now, even the last Mad Money watcher probably understood that last Friday was a POMO day. If the 10Y yield keeps rising next week despite FED intervention, we could experience a major shift in market sentiment, which could result in significant pressure on equities. In that case, QE2 would be dead before it even went into full throttle mode because markets start to worry more about inflation instead of cheering the easy money. I will keep a chart of IEF, Barclay’s 7-10 Year Treasury Bond Fund on top of my watchlist:
On the other hand, we should also see Gold rise if Bonds would indeed signal inflation fears. It’ll be interesting to see how fast the yellow metal can stabilize in such a scenario next week:
Finally, we have to recognize that the Dollar did NOT have a major move last Friday, but is currently struggling with resistance around 78.5. In order for equities to recover, we’ll need the Dollar to resume its decline soon:
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A young and savvy, yet experienced and accomplished investments mogul since ‘01; Michael has amassed a fortune as a private self investor. Recently starting his own successful blog and turning it in to a corporation — MIV Investments Inc., a company offering advice to thousands of people worldwide and attracting contracts from various reputable sources. His articles and publications have been linked to Forbes, CNN Money, Reuters, Bloomberg, and many other top worldwide mainstream media sources.
Michael Vlaicu
