Do you go Long or Short Yesterday?

Posted by David Rosenberg - Gluskin Sheff

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“Yesterday, all my troubles seemed so far away  Now it looks as though they’re here to stay  Oh, I believe in yesterday.”

Yesterday was a real exclamation mark in terms of representing the end of the bear market rally:

• Dow down 115 points to 10,510.95
• S&P 500 down 1.4% to 1,120.8
• TSX off 48.5 points (-0.4%) to 11,764.51
• U.S. 10 year Treasury note yield rallied 9bps to 3.36%  
• U.S. 2-year note yield rallied 5bps to 0.76%
• Canadian 10-year note yield rallied 10bps to 3.40%
• Canadian dollar sold off a bit yesterday, to 1.035 versus the U.S. dollar (from 1.0325).  In U.S. cents, the loonie went from 96.85 to 96.39 cents.  And so far today, the CAD is down further, to 1.05 (or 95 U.S. cents) — now below its 200-day moving average. 
• Euro hit a four-year low of 1.2211 from 1.2395 yesterday and the Euro/Yen cross is near eight-year lows; 50% of Fibonacci retracement on the Euro is at 1.2134  (from the October 2000 level of 0.8230 to the July 2008 level of 1.6038)
• Crude oil price down 42 cents to $69.66/bbl, to October 2009 levels.  Indeed, the S&P 500 has now sliced below the 50-day moving average and is within 15 points of doing so with respect to the 200-day m.a., which would mean a real rupture.  The yield on the 10-year T-note has already dropped below moving averages, and ditto for the oil price.  There is a rally all right — in risk aversion trades.

Oh yes — how can we forget?  If you don’t see deflation then you are obviously not looking at lumber futures — it seems that the market responded more to the U.S. building permits data than the headline housing start number yesterday because lumber prices were cut down a further 8.6% and have now plunged for four straight sessions and is down 26% from the nearby April 21 high.

… pages 2-9  HERE