Tuesday, February 15, 2011

Stock Market -- Position Overview

Our previous newsletter, dated October 31st 2010, stated that the stock market could continue this counter trend rally, with a projected DOW trading range for the month 10,750 and 11,200. The actual result saw the DOW continue its melt-up advance, with a trading range for the month between 10,711 and 11,247.

The US treasuries were projected to come under price pressure, inversely moving yields higher, with a forecasted base-yield for the US 10-year Note at 2.50% or higher during the month. The actual result produced a wider range than anticipated, with the US 10-year Note having a yield range for the month between 2.33% and 2.72%.

We stated that the US dollar could remain in short supply, until the Federal Reserve fully adopts their version of Quantitative Easing (QE), causing it to appreciate through such a dismal financial situation, with a euro fx equivalent trading range for the month between $1.36 and $1.40. Reason being, the US dollar denominated assets remain the largest liquid investment in the world, and also because a large eurobond market simply does not exist. One must buy individual national debt, to invest in euro, which limits the possibilities. This forecast proved to be accurate, as the US dollar was supported, with a euro fx equivalent trading range for the month between $1.3662 and $1.4043.