One Week almost gone

So now we have the last day of the week in front of us and equities are trading more or less where they were before last weeks NFP and strong move up. Last nights failed car bail-out is the main reason for the over-night drop, but also some straight talk from JPM CEO Jamie on CNBC even through CNBC this morning is trying to focus on the positive.

Fixed income in the US are trading on lower levels, but in Europe rates are somewhat higher not least in the long end that have been lacking any ALM bid, so 30 yr swaps trades more than 100bp over US. Credit spreads with no Government support are also back to the highs this morning.

Also we have seen a big sell-off the dollar and a rally in gold, oil and other commodities. In contrast to before the positive correlation between risk appetite and the dollar have broken down, see this good short view from FT.

So what can we expect from here. Are we still in a - 1929 like range - until the end of the year or will we actually break down here as too many traders have been betting on the year end Christmas rally. The range trade is probably the most likely, but I am sure a break-down would hurt most people in the short run. On the other hand it would be better going into next year for most people.

I guess we will get the direction from any more news during the day on a rescue attempt to come up with a new bail-out plan. Focus will be on being able in S&P to hold above any former lows to keep the market from breaking to new lows. The good news is we have the usual monthly option expiration next Friday, so there are lots of opportunities to play both outcomes relatively cheaply.

I think we at least will try to trade lower today in equities and that EU fixed income (also the very long end) offer some short term value here, the "1929" range is looming out there together with full moon and other Vodoo issues.