With crude oil relentlessly going higher, along with the grains and industrial metals, the bond market is feeling the heat. Its the reflation trade, part 86. We've seen this story before. Anytime you get a weaker dollar, commodities going higher, and lots of money printing, the inflation alarmists come out of their bunkers to recommend that you sell bonds and that a commodities super cycle is coming.
I am one of those inflation alarmists. But I never took any action because I was focusing on stocks and wasn't looking at the big picture. But now is not the time to act on those views. Same with going long stocks, as the inflation talk has weakened the bond market to the point where it is going to start being a negative for the stock market.
Most big selloffs in stocks were preceded by a big selloff in bonds from anywhere from 1 to 5 months before it happened. If this bond weakness goes into June, that sets up a potential waterfall decline scenario to occur from anytime from July to December.
We are seeing some of that bond weakness spilling over to stocks. I wouldn't be a buyer of this dip until you get closer to SPX 3860, the previous high in January. Don't expect any big selloffs just yet, still feels like too many people are looking for that 10% correction and stimulus pump is still ahead so no big flushes until at least the first Biden stimulus is passed.
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17 comments:
Bull case looking weaker and weaker hmmm
Flat. Not worth risk long or short
SPX only down 1% from the top. Could go much lower
Long 20000 CLOV
What's the call here? Long bonds or short stocks?
Long bonds but only for the next few days. Bond weakness is fhe first major sign that we will have a pullback in stocks soon.
Long CLF (minerals/mining inflation), long MOMO calls (china), long CLOV (spacs/chamath)
Short democrats/biden/harris
Sold clf, short AA. Maybe today tutes rotate out of inflation trade and go back to tech
covered aa, long z
Out Z, short AA
corona is like nothing now. It's not even march and the cases are like 40K a day in the US.
At this rate, Biden, the NWO, the CDC and deep state will have successfully erased the numbers literally to nonexistence.
Magically, the economy will open up. People will travel, hotels will be booked, theatres packed, people at bars and restaurants, companies hiring.
Add to that 1.5 trn for people so half of it can go to stocks. The inflation is going to be rampant. Rates will go up and so will stocks.
I think ATH coming soon. Then a 20% correction probably
Yes, I am starting to slowly buy the dip. Nothing aggressive for now, think we bottom between 3820-3840. Also bought some more bonds.
NDX crashed 8%.
Let's get a red to green bounce
Out TLT calls. Long Momo July calls $15 and RMO
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Would love to talk to other traders. Leave comments and such so we can collectively combine our feel and consensus on stock and market direction.
OL DAWG
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