With QE3 QE4 at 85 Billion/month, we are seeing a rising dollar, lower gold price and miner index, and a slumping 30 year US bond price. This does not add up. Something is not right. I am most concerned about the 30 year bond price. The main purpose of QE is to lower the bond yield to maintenance the near-zero interest rate (buying bonds). As of today, QE3 and QE4 have the exact opposite effect the FED desires. One may argue that traders are dumping bonds for stocks. This argument is only half true. Smart money is dumping bonds at a faster rate than the FED can absorb them resulting lower bond price. And smart money is not converting the dollar to stocks, instead it is stashing the dollar resulting a rise in dollar. Let us be careful. Stormy weather could very well be ahead. Once the slumping bond price becomes the headline news, we now the storm is here.
Good luck to you all.
Debt ceiling fight is likely, we all know that including Wall Street pros. Last week's powerful upward move had the appearance of break out for bulls and climax for bears. One thing is for sure--this is an aging bull market. Low hanging fruit were long gone. Are we at the turning point or there is still a last leg to the bull market? Since we are trading vxx, let me present the question in another way. With the current low vix, is the vix going lower further?
A bull's answer: Yes. There is plenty room for vix to go lower. We can keep on riding the market higher.
A bear's answer: No. vix is at historical lows, this is unsustainable. No bull market lasts forever.