The Fed apparently leaked news to the Wall Street Journal yesterday to lower expectations for the size of QE2. It is going to make things trickier to trade on the FOMC announcement next week. The consensus is moving towards a smaller program. This could actually make the immediate selloff on the news more buyable. It also would make shorting ahead of the news riskier because expectations are lower.
What I noticed yesterday was the lack of sustained selling in the market despite the obviously stronger dollar. This has been a continuing theme for the past week. It looks like the short dollar trade is much more crowded than the long equities trade.
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