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Tuesday, January 19, 2010

Bob Prechter of Elliot Wave and his view on the Invincibility of the Fed

Interesting article today by Bob Prechter on how the market's interpretation of the US Fed's actions may be another great contrarian indicator of future market performance.

In it he discusses US Long Bonds performance over the course of 2009. At the beginning of the year with the Fed Reserve's announcement of its intention to buy $300B of long term US Government debt (on top of $1 Trillion of mortgage backed securities) one would have suspected US Long Bond prices to rally however as Bob shows the performance for the year was -26%. At the time there was an extreme 99% bullish trading sentiment, classically set up for the correction that followed.

Those who wish to read the original article by Bob Prechter can simply click on the Elliot Wave International logo to the right of this blog or follow this link.

Now with the profligate spending being announced by the Obama Administration leading all the inflationists to call the death of the dollar being imminent perhaps something else in in store. A US Dollar rally would be the equivalent direction to that which we saw in US long Bonds discussed above.

Perhaps the dollar's death is some way away yet?

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