From Market Talk:
Some interesting action in financial markets yesterday and today, with the US dollar looking perkier, euro having a harder go of it along with stocks, Treasurys retreating and gold still scorching.
Leaves us wondering just a little if the QE2 trade — buy Treasurys, short dollar, buy stocks and commodities — has reached the saturation point. Heading into the Fed’s expected QE2 announcement, we were thinking that expectations for easing were all priced into stocks, at least, and the eventual announcement would likely get greeted with more sellers than buyers. Wrong, as Dow Industrials ripped more than 200 points higher the next day.
Perhaps that was the final capper on the trade, though, since stocks and the euro haven’t made much headway since, and Treasury yields are probing back to the high end of their recent range. Gold continues to streak higher, but could be driven much more now by those searching for safe, hard assets, rather than as a weak-dollar, long-commodities play....MORE