The market peacefully lives through the last days of calm. A crash in Treasuries will shatter the financial order established 50 years ago.
SPX targets 1500.
10Y will skyrocket to 4..5%
EURUSD will be pushed to 0.86..0.87
The story of the dollar, yields and stock prices are tightly related.
It all began in 1971 when the US unpegged the dollar from Gold. Real estate prices picked up in the 70s, and starting the 80s dollar-printing became the fuel that propelled valuations to where they are today: freshly minted dollars found their way to the Treasury market, pushed yields lower and lower, forcing everything else to reprice higher and higher.
Something broke in Aug 2008 when DXY shorts were crushed, and the correction in the Euro began. The move to 0.87 will complete wave A of this correction. The accumulated bubble pressure will produce an explosive move in all three classes of assets: stocks, bonds and currencies.
The market always forces you to abandon your beliefs. At the end of this move everyone will abandon three beliefs:
1) "low yields are here to stay forever"
2) "the dollar is too strong and it can only weaken from here"
3) "stocks can only go up because the central banks have eliminated all risks"
The market uses pain as one universal medication to fight everyone's convictions. Because the above three are holding so strong today, the amount of suffering administered by the market will be overwhelming.
SPX targets 1500.
10Y will skyrocket to 4..5%
EURUSD will be pushed to 0.86..0.87
The story of the dollar, yields and stock prices are tightly related.
It all began in 1971 when the US unpegged the dollar from Gold. Real estate prices picked up in the 70s, and starting the 80s dollar-printing became the fuel that propelled valuations to where they are today: freshly minted dollars found their way to the Treasury market, pushed yields lower and lower, forcing everything else to reprice higher and higher.
Something broke in Aug 2008 when DXY shorts were crushed, and the correction in the Euro began. The move to 0.87 will complete wave A of this correction. The accumulated bubble pressure will produce an explosive move in all three classes of assets: stocks, bonds and currencies.
The market always forces you to abandon your beliefs. At the end of this move everyone will abandon three beliefs:
1) "low yields are here to stay forever"
2) "the dollar is too strong and it can only weaken from here"
3) "stocks can only go up because the central banks have eliminated all risks"
The market uses pain as one universal medication to fight everyone's convictions. Because the above three are holding so strong today, the amount of suffering administered by the market will be overwhelming.
