Thursday, December 19, 2013

Bond Long Squeeze

The 10 year yields are squeezing higher this morning, and it will be a huge headwind for the stock market.  Yesterday was fast money traders looking to catch any rally, and shorts being squeezed intraday by the HFTs and eager beaver longs.  There will be payback for a senseless rally in the coming days and weeks.

Taper is huge news, no matter how much the bulls shrug it off as being inconsequential.  The Fed dovish talk doesn't matter, what matters is that they are actually reducing bond purchases, the lifeblood of this market.

With the taper now starting to roll, I am extremely bearish on this market.  This is a huge fundamental change, and no, it was not priced in because most were expecting a taper to start in January or March, depending on the data.  Fed has said the data is strong enough to taper.  That is a game changer and we will feel the selling pressure in January.


Anonymous said...

There will be selling pressure in January.

Anonymous said...

May I know why it is January, not other time?

Market Owl said...

Because we've got so many big gains this year, long term investors will be reluctant to sell in the last two weeks to book capital gains and have to pay taxes for next year.

And the Fed taper will be putting pressure on bonds, which will spill over into the stock market.