Next week’s Fed (FOMC) meeting is undoubtedly the most anticipated economic event of the year 2013. A lot has been written and talked about this meeting, and quite rightly so. Given the fact that all this uber exuberance in the Stock and Fixed Income markets is almost entirely dependent on The Fed, any change Big or Small, in the smallest of the variables, will send shock-waves through all Financial markets. It is not what’s expected, but the unexpected (surprise) that has all the market participants shitting their pants. Everyone knows that a QE Taper of around $10-15 Billion is a realistic possibility. As such, market participant have positioned themselves accordingly. Any deviation from that number and we could get a CNBC special, “Markets In Crisis”, in which Jim Cramer is getting butt fucked by Chuck Norris.
I believe there are two scenarios that can occur, one of which is Highly Likely, and the other one is Legitimately Possible. Each scenario will have its own effects on the Financial markets, some of which are outlined below.
Scenario #1: QE Taper (Highly Likely)
- If we get a Taper for the expect amount ($10-$15 Billion), the market will trade from flat to mildly bearish.
- Strong US Dollar.
- US 10 Yr Treasury yields above 3%
Now, if we do get a taper, I believe that The Fed will leave the possibility open for adjusting the QE amount according to economic conditions. So if the economic conditions were to worsen, we could get MOAR QE. In this case, markets could rally and kill the shorts.
Scenario #2: No QE Taper (Legitimately Possible)
- Markets Rally.
- Weak US Dollar.
- US 10 Yr Treasury Yields will drop.
In both scenarios, the possibility of Bears (Shorts) getting killed/slaughtered is very high.
Use Tight Stops.
Best of Luck. You’re Gonna Need It !!!
Wall Street Fool
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