Dollar (UUP) Rises Most Since June, Gold (GLD) Falls Most in a Year, Traders Move Up Date for First Fed Hikes
by ilene - December 4th, 2009 2:43 pm
Dollar (UUP) Rises Most Since June, Gold (GLD) Falls Most in a Year, Traders Move Up Date for First Fed Hikes
Courtesy of Trader Mark at Fund My Mutual Fund
This trio of Bloomberg headlines is exactly why I’ve been cautious about jumping in the crowded trade. (in fact we actually dumped most gold/silver & went long the dollar as an insurance policy last week in case the crowded trade finally burns down). Anyone who lived through 2007 and 2008 knows what happens when crowded trades reverse… not to mention those of us around in March 2000. Those who continue to play the crowded trade have been big winners, and it’s the right thing to do as long as you can jump off the bubble before the hedge funds all try to exit the narrow door at exactly the same time. That said, trends can play out MUCH longer than anticipated and one day does not change the story. Everything that is reversing today could do a 180 degree turn next week… this market has no memory from day to day. And all it will take is the next economic report to be underwhelming and we’re back to all the same old trades…
The irony is that the driver of these reverals - the jobs report - is not that good once you look under the headline. I am very curious what the Trimtabs data we cited yesterday will show for November, and how much of a discrepency between the 2 reports there is. But we won’t harp on that… reality is not what matters in the stock market; perception of reality is all that matters. Very few people look at details in a stock market where stocks surge or crumble 15%, 10 seconds after an earnings report headline is released…. and hundreds of billions of market cap are added / dropped in indexes seconds after an economic headline is reported. Who has time to actually look under the hood for details anymore? HAL9000 doesn’t!
Let’s look at the 3 headlines one after the other, but I am still sticking to my "no Fed fund rate increase in all of 2010" even as traders are betting it will happen much sooner. I think the market underestimates Ben not wanting to repeat (what is his belief) the mistake that governments and central bankers in the past…