It seems like the new behavior has cemented where yields are rising and equities are sliding (probably mainly due to the rising refinancing costs). The western indices nowhere near their summer lows so there is certainly more room down but then the emerging markets will be under a lot of pressure and might drop to new lows if the correlation maintain. Also The Nikkei has been making lower highs+lows indicating a descending channel. My bottom line is that I can`t see the catalyst for the markets to go higher for a while so I sense the least resistance on the downside.

During the recent months, whenever I talked to someone about what they are bullish the most, almost everyone (including me) claimed that it`s the US dollar. As it turned out we were wrong – the EURUSD stayed in a range. I think it is a shining example of how sentiment and positioning work, and one must learn from these experiences that even if something looks certain, it might not be.

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