There have been instances where the dollar declined together with equities. This is because, the US economy is seen weaker than the rest of the world, and this affects the global economy too. Equities drop when the macro outlook is either uncertain or bad.
Let’s watch how the market will react to the poor ADP results.
The probability of a decline in the index is about 70% as measured by the previous ADP impacts on stocks.
The EURO is surging, while the USDJPY is going down. Japan intervention has failed. The yen continues its climb.
Currently, the US assets value are inflated, due to QE. This means the market is over its fair value.
However, comparing equities with bonds, the former is much much cheaper. We might see a bond bubble soon, and guess a few hedge funds will go kaboom.
How will that affect stocks? I don’t know yet. We can just watch it unfold before our eyes.
DANGER SIGNS:
QE2 anticipation led this latest stock rally. Fundamentals did not keep up with the rally.
ALCOA’s earnings are coming soon! 2 more trading days before Alcoa’s earnings.
Stay out of equities seem to be the safest choice for conservatives. For Aggressive traders, please trade with 10% of your usual trade size. That’s the safest advice for now.
No comments:
Post a Comment