Morning Report Wednesday 10 September 2014
Will the US Monetary Base (AMB) be the catalyst for an S&P500 correction?
I have been focusing my attention on increasing US interest rates to predict the next 10% correction for US equities – it’s been over 3 years now! When we look at chart 2, last night, the rally has confirmed my fundamental view, with a technical signal. US interest rates are moving higher, taking the $US with it and pushing gold and the $A lower – we remain very bearish gold. On a risk / reward basis I am now bearish the S&P, believing the next 10% move is more likely down than up. However, I am a ferocious reader and yesterday I found a blog by an old trader friend of mine, Ray Barros based in Hong Kong. Ray has said for a long time that traders should be long, or out of US equities during this sustained period of the US Fed stimulus. However, he regularly refers to the Adjusted Monetary Base (AMB) as needing to roll over prior to any meaningful correction:
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