For those in equities..

[themack89]

For those who are currently heavily into equities, be aware that PIMCO has been buying up bonds hardcore and markets have been rallying in unison with bonds/treasuries. Something fishy is happening and the FOMC Announcements are on Tuesday at 2:15pm eastern to adjust the rates.

I am hopefully wrong, but a big move could be coming..

[D-Xu]

Mack I saw this, and I suspect that you might have as well:

http://thenewtraders.files.wordpress.com/2010/08/sp500-yield-copy.jpg

It does seem that equities are overvalued, although I don't know if the FOMC meeting tomorrow can break a trend that has been developing for two months. I also read that the low yields might reflect expectations for a extended period of low interest rates and not just those of a recession--so that in the future, the yield will increase while the S&P holds steady.

Either way, I believe the long term hedged play would be to short both the S&P and treasuries, betting on convergence between S&P's and treasury yield.

I definitely agree that the FOMC meeting tomorrow will be significant, and much more so than recent ones. I will be watching gold.

[themack89]

I don't look as far back as you do.. I'm just looking at the past several weeks and months.

But it's not cool when treasuries and S&P are trading in unison, one of them is wrong and I highly doubt it's PIMCO.

I believe what you are seeing in your chart has been labelled by Larry Williams as the "jaws of death" pattern.

[D-Xu]

Update: WSJ and, more importantly, a Goldman Sachs report both claim that the Fed will likely reinvest proceeds from the Mortgage Backed Securities it acquired during the financial crisis into the bond market to stave off deflation. This would definitely be bullish for treasuries. GS also had a bullish outlook: it pegged a short term target yield for 10-year Treasuries at 2.50%.

Are you looking to make a play tomorrow?

[Canmorite]

Super lights vol today, bumped up against resistance all day. I think people might use the fed announcement to sell equities regardless of what they say :dunno:

Great chart btw.

[themack89]

Originally posted by Canmorite
Super lights vol today, bumped up against resistance all day. I think people might use the fed announcement to sell equities regardless of what they say :dunno:

Great chart btw.

August is usually characterized as a low volume month.

That's summer trading for ya!

[broken_legs]

Mid term elections.

[D-Xu]

As I expected, the FOMC announced that they would buy Treasuries (though not the 30-year). Apparently not everyone was expecting this, since Treasuries were pushed higher.

In line with this announcement, the Canadian Dollar, the Euro, the Australian Dollar, and the Yen spiked higher on the news, as did gold on decreased fears of inflation.

Still, I decided not to make the short-term gamble. Looks like PIMCO made a killing, though!

[themack89]

*AHEM*..

Lol market today.