Bears Beware
23rd January 2008
The bottom has arrived. Huge reversal day with lots of volume. This should be able to carry over for a few days anyway. Rumors of a regulatory bail out for the bond insurers ignited the market like a rocket today. Bears need to beware. With the fed watching the tape, is has to be demoralizing. Just imagine if we could get the Dow down 1000 over night. We could get the Fed to drop the Fed funds rate a full point!
The bond market suffered a major sell off after-hours when the rumors started cooking. The 10yr dropped a full tick and half, all after the official 3:00 p.m. eastern close. This was the largest after-hours move that I have seen in the last 4 years that I have been trading bonds. This lends some validity to the bond insurer bailout rumors. The curve was in flatten mode really only in the long end of the curve.
- BA