friday finish, page-18

Just got off my morning meeting yarn with some aussie guys. It seems the 30 year auction in the US last night was poor showing, having settled at a higher yield than expected, which started to drum around concerns that the Chinese would not be so aggressive and willing to participate in future bond issues.

This could bode ill will to the US economy further down the road, as they realise no one wants their paper and they can't fund all this expansionary policies.

Further, this might be the catalyst once more to start to sell the dollar into new trading ranges. Now normally you would expect a weaker US dollar to result in higher equity prices. However, when the selling of the US dollar is the lack of confidence in the currency and the government, expect US equities to pare back and other indices to hold.

Interestingly enough 8 weeks ago, just prior to the bull market run, the UK gilts were priced less than last night (i.e. were poor in demand, but not as bad as last night) and the markets sold off worldwide for 3 days.

Last night's poor showing was good for 80 points and half an hour. Just shows you the extreme bands of emotion that govern the market.

One could argue that 8 weeks ago, the market was in hairtrigger mode and now we're getting complacent. The emotion of the market should at some point meet in the center, which really means that the market has to start a little derisking, sooner rather than later.

Potential catalysts:
a) Jobless data tonight > ADP numbers
b) Any signs of hiccup in China's growth machine
c) How investors will react to the massive capital raisings to come.

My call is we will head sub 8000 in this sell off. It may sound like rubbish to technical traders and such, but a pre-flagged 30 year bond auction being sold for less than expected are warning signs. And the bond market is rarely wrong, and it certainly is not showing a bullmarket yield.