Wednesday, October 16, 2013

US Default 1 Day ahead

Noone really belives that! Markets are irrational, but if any other country in the world would dare to mention

“Sorry folks, there might be a chance, that coming Thursday, we will not be able to pay our bills. It’s not because we could not print any more money, but because we are not allowed to use our printing presses any longer.” …

Well, the Euro was doomed in the eyes of the markets, because Cyprus had to close it’s banks for a few days. Tomorrow the US of A might not be able to pay its bills, and my charts look like this:


These are daily charts from left to right EUR/USD, GBP/USD, USD/JPY and below Gold, S&P, 30y Bonds and Oil.

Given a rumor of the magnitude we are faced with, I would expect the USD and S&P in the cellar, while commodities are soaring, with a relief rally afterwards.

In numbers I would expect

EUR/USD at 1.48, GBP/USD at 1.68, USD/JPY back to 0.93, Gold at 14xx, S&P barely holding 1600, Treasuries around 125 and Oil around 120 at least.

Instead we get: Euro and GBP on hold for a month, Yen on hold, Gold down, S&P reaching new highs, Bonds trying to reclaim lost territory (they came already down from lofty highs earlier in the year) and Oil down

Never try to outthink the markets. I will stay out of this, as it makes no sense to me.

But …. Maybe, just maybe the markets have reverted to: Buy the rumor, sell the bad news … Kind of what you would expect from a rational market….Markets are irrational, can’t be that reasonSmiley