The incredible rally continues as better earnings and sentiment keep lifting these markets.
This in turn has lead to big drop in bonds as the long end yields rise. Bunds briefly dropped below 120 before staging a small rally as stocks stumble today on the back of weakness from Deutsche Bank after their results.
Euirbor spreads continue to rise at the front end as traders price in a rate rises, as SEP10 Dec10 spreads breaks 37 before coming down to settle at 36.5 currently. In short sterling spreads continue to make new highs at the front with Jun10-sep10 trading 56s!
Looking ahead, it looks like fear is reducing, the VIX is trading in the low 20s and analysts are stumbling over them selves to raise their projections on year end S&P 500 as well European market targets.
On the previous pullback there was still alot of expectation on some type of correction, but now we are approaching the terrirotry where there is a sense of complacency, and if we rally close to 10000 on the DOW and everyone is convinced the worst is over, that is when we will fall hard. That is my take as things are still far from what they need to be. We shall see how it pans out.
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