Pretty ugly finish there on US markets after being up on dovish...

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grandcaruso

2,317 Posts.

11/02/16

08:06

Post #: 16991613
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Originally posted by grandcaruso ↑

Someone is going to have to apply the defibrillator to the Dax shortly. It may have one short covering rally left in it but otherwise for the time being it looks like terminal. Dax is sitting 1 point above it's Oct 2014 , below that we are looking at 8000. With the prospects of Draghi bringing in negative rates next month the euro still trades comfortably above 1.10 and recent economic data out of EZ has been terrible. And we aren't even mentioning the credit bubble and derivatives exposure you speak about.

US markets had a second day in a row late afternoon comeback. US bond yields are back to where they were early 2015. There's no way the market is pricing another Fed rate rise this year or even next year and so it all comes down to Yellen's testimony tonight. Doubt she'll say much so I think the market might be disappointed. The dam wall might bust so I'll be up at 1am and ready to go short.

Noticed the guy from CMC markets yesterday was saying on Fox business how the Aussie banks were unbelievably cheap and yields at current prices were 10 or 11%. Even suggested that some people will be leveraging up and borrowing money at 5% and buying bank shares to get the 10% yield which he seemed to be of the opinion was pretty much risk free. Mind you this is the same guy who called BHP at $30 a bargain and $25 was the best Xmas present he could get and kept talking about BHP's yield of 6 then 8%. That trade didn't work out well and even though I can see a short term bounce in Aussie banks I can't see this one working out either and especially not on a leveraged basis. Yields are based on historical profits and can easily crumble if were do see a credit squeeze which could bring on higher funding costs and long term higher bad debt charges. We will see how this one plays out over the next couple of months.

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Pretty ugly finish there on US markets after being up on dovish Yellen comments. Dax had a nice bounce so did Deutsche Bank but for how long. USD index is looking particularly weak, strong yen doing most the work but euro and pound starting to get a lot stronger too. Some money to be made on a weak USD if the trend persists.
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