I guess it makes sense to quickly pull this apart, break it down and get squared on where I’m heading next, as the Fed’s tapering announcement yesterday has certainly raised some questions.
It’s obviously still a bit early to be making any “rash decisions” (as a single day of market movement is that and only that) but it is interesting to take a quick look at how a number of asset classes have “initially reacted” to the news.
Gold has been crushed, moving lower a full 30 bucks.
- But wouldn’t “tapering” be viewed as “less stimulus for markets”? Shouldn’t gold have shot for the moon on the news?
U.S stocks shoot higher, as Dow gains 300 points.
- But isn’t the idea of “tapering” going to lead to higher interest rates? Shouldn’t stocks be falling as the Fed pulls back on its POMO and market liquidity injections?
The U.S Dollar has moved higher, but is still well under strong areas of resistance. The U.S Dollar has stalled already.
- But shouldn’t the U.S Dollar “break out” on news of “tapering”? Isn’t the idea of “tapering” supposed to be good for the currency?
Bonds as seen via TLT haven’t even budged. U.S Bonds are still very much under pressure as selling continues.
The media spin is clear – that the U.S is indeed “rebounding” and that the recovery is well under way. This now “confirmed” via the Fed’s decision to taper. The Fed was doing the right thing while adding stimulus, and now will be perceived as doing the right thing in pulling back right?
The puppet show continues, as for the most part “none” of the above “initial reactions” made any immediate sense. It’s unfortunate having things pushed back a day or two but as it stands……everything is “still” very much on track.
I’m expecting to see the U.S Dollar roll over here quickly – (early next week) and will continue with the same framework I’ve been working within these past several months. The Nikkei hit my 16,000 mark for a second last night as well so…..that too will provide some valuable information moving forward.
Sitting out yesterday in near 100% cash was one of the single best trade decisions I’ve made in the past few months, now allowing me to deploy “big guns” at an instance – when “real opportunity” presents itself.
You where warned. You may have gambled. You likely lost.