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Falling Equities Still Key for Dollar
Intermarket analysis set-up still suggests that fresh equity selling remains the only source of support for the US currency.
Thanks so much for your prompt response re Yen as refuge currency in event of another deleveraging/markets crisis.
I'm operating a portfolio of Norwegian Krone. Hence my queries about its continuing viability, and how it might fare in such a crisis.
If you have the time your views would be hugely appreciated.
John
ROB, sorry i didnt get chance to answer yesterday.
SPEC, here's what someone commented on my post on seekingalpha yesterday:
" JP Morgan have gunned the E-mini's virtually every single time US equities have started to back off the "rally" engineered by the FED and Treasury over the past 30-45 days. They have been a permanent prop under the stock market during that timeframe, and they have billions and billions of government $$ to inject anytime prices start to weaken. Most of the late day "miracle rallies" have been due to nothing more than JPM engineering, and NOBODY stays short going into the last hour anymore, they just sit back and place side bets on what exact minute the buy programs are going to roll in. And roll in they always do... most recently at 3:20 eastern. Volume, internals, technicals, fundamentals all look and smell like yesterday's breakfast. "
it validates the theory that US banks's buying aims at supporting shares and persuade Geithner to let them repay tarp and free themselves of pay and operational restrictions.
ASTORIA, rationale is that treasury buying injects system w liquidity, relieves stress in credit system and ultimately helps sentiment and stocks. this worked great in March 18 when Fed first announced the purchases. yields are capped, dollar drops and stocsk rise.
PARTISAN, yen should rally during continued equity selling and weigh on USDJPY.
Ashraf
Many thanks,
John
Could you explain why " $300 billion in planned treasury purchases, the Fed has bought $156.528 billion so far ...... With soaring bond yields shrugging the treasury purchases, ......"
Why with the fed"s action of treasury purchaseo will USD negative ?
Appreciate your insign.
Thanks for giving me the heads up on that - I certainly won't be reading any Japanese blogs any time soon, or ever for that matter. I think I'm emotionally attached to GBP/JPY and EUR/JPY because I've done well with those pairs in the past, but AUD/JPY definitely makes sense (as do all yen crosses). Good luck to you too!
markets were pricing in a depression pre fed printing but have been repricing a recession based on the fed preventing banks going bust and restoring confidence in 'money.
inflation expectations can can improve stock prices as they are good hedge against inflation due to future income streams they bring. we moved from deflation which is stock negative to inflation that is stock positive.
also, deleveraging was too powerful and fast and brough about decade lows in US which probably caused some of the initial flows into stocks and some techinical buy side signals.
investors realised banks were actually safe due to feds actions of last resort lendor and if banking sector is guaranteed confidence normally improves etc.
the markets simply overestimated the extent of banking issues to start off with which chocked off any bullishness in stocks till fed came in.
its pretty hard to say how the year will end but i expect the market to pull back during autum this year as good news becomes the norm and mortgage interest rate shocks start to then hurt real estate markets and probably bring some poorer economic data.
thanks
I do not understand how the money can go from their printing press to stocks? Is money being lent to the banks being invested in the stock market? Could you give a specific example of how $1 would go from being 'printed' by the govt, to buying a share of stock...
Thanks,
Matt