Monday, December 21, 2009

Stock Market -- Position Overview

Our recent newsletter, dated November 20th, stated that market bipolarity, intended or not, may be heightened by the massive, concentrated Quantitative Easing (QE) by central banks, as well as fiscal largesse, instead of a middle-way that allows fundamentals to flow. We further stated that heightened volatility is likely, even with central banks various attempts to control the market movements to less than what occurred this past winter. We anticipated that the continued QE could cause the DOW to remain within an "elevated period of consolidations," at least for the near-term, with a projected trading range for the month between 9,650 and 10,850. The actual result saw the DOW remain elevated, but with a narrower trading range than forecasted, between 9,678 and 10,495.

We stated that currency-debacle risk can no longer be treated with benign neglect by central banks nor segregated in portfolios, and anticipated that the US dollar would remain under pressure, at least for the near-term, with a projected euro fx equivalent trading range for the month between $1.46 and $1.53. The actual result saw the US dollar decline in value as forecasted, with a euro fx equivalent trading range for the month between $1.4633 and $1.5140.

We also stated that the lack of near-term confidence in the US dollar could cause the US treasuries to remain under price pressure, with an expected base-yield for the US 10-year Note of 3.30% or higher, during the course of the month. The actual result saw the US treasuries decline in price, inversely driving yields higher, producing a US 10-year Note yield range for the month between 3.20% and 3.56%.