Monday, August 3, 2009


Wondering whether QBE is about to break-out to the topside? Have a look at the chart...

To me this is partly a question about the USD. QBE's earnings on translation benefit from a stronger USD and stronger GBP. They are winning on the GBP for the moment (Note Kevin's Market Blog here and here has the GBPUSD coming out of a cyclical low). A rebound in the USD would be just the tonic...


In my view the risk trade is now bursting at the seams. Latest indicator - net shorts in the USD on the CME are approaching extremes... It's time to ask where are the stops - they ain't on the topside in equities or in the USD for that matter.

Conclusion: will look to add to QBE position.

A bounce in the USD, a pullback in commodities, a retracement in equities and a bid under US treasuries. At least I'm consistent I guess.

If we don't have a meaningful test of the trend this week, watch for how the treasury auctions impact the market. Just another test of the ability of the Fed to balance the scary market we live in.

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