While the long-term charts in the dollar and bonds look like a beginning, the emotion in today's tape feels more like an extreme that marks an end. The move in metals, bonds and the dollar began 7 trading days back so Friday's inflation news and today's Korean rebalancing story (emphasis on the word story) may have been anticipated to a large degree.
Stocks certainly have the more room to fall in here if they want to but if its inflation / dollar / commodity prices freaking people out it seems the long bond carries more risk and will lead the way down. Today seems like the kind of day that will leave volatility higher for a few weeks and ditto for correlations. Stocks will trade as an entity while the market sorts out the bigger picture. A jump in volatily could get ugly and end up lasting more than a few weeks given the low starting point.
I have started watching the 10-yr bund / U.S. bond spread as I anticipate that relationship going through some changes.
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