Thursday October 10, 2013 08:35
Markets continue to find support until a solution on the debt ceiling issue is resolved. Some chatter overnight, that a short term extension is in the works, contributed to some softness in the markets overnight but traders were quick to cover their shorts. You cannot commit to this market within a reasonable risk/reward scenario. The Bank of England kept rates unchanged which again reinforces accommodation from across the pond and Janet Yellen’s nomination suggests a continued bias in the US towards accommodative monetary policy. Putting everything on the table, with the caveat that physical demand has dropped off (bearish), you would expect this market to be closer to the $1,370 range, rather than testing the $1,300 level. The market is priced with a 90% bias towards reconciliation in Washington. Therefore the surprise risk continues to remain on the books of the bears.