Unemployment Sends Risk Assets Up on QE Expectations

By Tom Luongo in Shares and Markets | February 2, 2013 2:57 |

The equity markets are all in levitation mode now that all of the U.S. economic data for the week came in decidedly bearish.  Bearish data should not be bullish for stocks and commodities, but it is when the markets only function because of non-economic money printing by central banks.  This is known in common parlance now as QE.  So, to begin February we have nothing but high probability setups of higher prices across all asset classes for the month except Gold and long-maturity Treasury bonds.  Bonds are in a highly bearish posture while Gold is very neutral thanks to a market unconvinced of its role during these Bizzaro times where inflation adjustments to prices have to be approved by the Federal Reserve.

There is a narrative to maintain, after all.

Silver is still trading just short of a breakout level but record physical demand has the price suppressors on the COMEX on the run.  They will have to let the price rise or risk losing control of the market when too many longs stand for delivery.  Gold prices will be in the same position before too long.  The weak opening to 10 and 30 year Treasury bonds today nearly guarantee higher yields by month’s end.  There is now a very strong probability of a challenge to the all-time high on the S&P 500 this month.  Only at that point would I consider shorting equities.  Given how much money is flowing towards them right now regardless of the economic data, I would keep my stops very tight.

About Tom Luongo
Tom is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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