Trade Timing Inputs….Important news
Mario Draghi’s comments today have provided some important information that will help facilitate the timing of the Long Dollar, Long Bond, Short Stocks macro trade. It is apparent that the German’s are not on board for a European QE forever, they are maybe the only rational economic brains on board in the global arena at the moment.
Here are the ramifications of this news:
1) This will push back how soon the strong dollar will exert itself. It is headed higher but for other reasons first, primarily the impending roll off of the FED Balance Sheet which will take over direction of interest rates, i.e. higher rates eventually.
2) The roll of of the FED balance sheet will eventually push interest rates higher, but for the moment the roll over in the stock market will direct funds to buy T-Bonds for safe haven purposes.
3) As we pointed out yesterday, our view is that over the next three years we see the dollar going up 100 percent, and Bond prices only increasing 18 percent. So the important relationship will be between the dollar ETF UUP and the bond ETF TLT. At some point as T-Bond futures reach the 166 level we will want to move to a long dollar/short Bond trade.