I closed the second half of my CAD/CHF @ 0,7684 with a profit of +83 pips. I opened a nesw trade with EUR/CAD long @ 1,5151. I do expect a rising volatility in the currency markets, especially in the EM (minor) currencies like Argentina, Turkey, Brazil etc. Although i do not trade minor currencies a rise in the dollar (which should go on on mid term view) will effect EM and of course the stock markets on the long term. US job numbers have been best in several years so there is a likelihood that the US will raise at least two times the interest rates. Interest rates are prices: the price of money and of course people will move out from EM and switch to the USD if rates rise (and they will). Another risky problem its outcame is uncertain is the new Government in Italy. Italy is like many other countries insolvent and austerity will kill the society (first Greece, now Italy, than Portugal, than Spain and of course Germany one day). You can not borrow and never pay back. You can not high tax your people and believe this will go on forever. You can not open Europe to the rest of the world for immigration and ask your own people to pay the bill forever. It is impossible and you do not need to be a Professor in Economics to understand this.
Martin Armstrong is mentioning this over and over again: Bonds can fall = yields can go up faster than people believe. We have seen this last week when the yield for Italian Bonds rised from 0,3 % to 2,5 % in a single day! The problem are the banks which have a lot of non performing loans in their books. But Deutsche Bank stays again and again the headlines and they are (unfortunately for us Germans) broken. They are dead under water with a derivatives protfolio of approx 48 Billion, exceeding Germany’s GDB >10! Who will pay for this? Who can be the counterparty of all that shit? This can not last forever and i am very sure that our kids will face more than one financial meltdown, which will end ugly. Since then SPY stays in the trading range between 255-285 and flirting with the upside. IWM is showing clear relative strength whcih means that the boarder market in the US stays intact and strong. I do not know who buys at these valuations and it is not necessary to know that. The only thing we can do as small traders to stick to our trading plan and wait for hints and clues. My long protfolio is doing ok my hedges loose when my long portfolio wins. Overall i am in profit and my fx positions are doing well. Time will tell the complete story.