While Jim Bullard has admitted that "tapering is tightening" [5], the rest of the Fed remains adamant that reducing the flow and promising ever-lower for ever-longer rates will make up for the supply of portfolio-rebalancing free money. One glance at the following charts suggests that the bulls are losing faith but the dearth of bears leaves the low-volume levitation of US equities standing on increasingly fragile foundations.
Tapering is tightening as bulls lose faith...
[6]
But Bears remain in hibernation...
[7]
Global Macro Hedge funds remain long the S&P 500 and show no signs of faltering (for all those talking-heads who proclaim that investors are anxious!)
[8]
But the massive spec positions in AUD (short) - note the last few times the AUD positioning was so short...
[9]
and Crude oil (long) spec is extreme
[10]
So Bulls are losing faith based onthe Fed's taper... bears are non-existent still and leveraged accounts remain as long as they have been in months of US equities... combine that with exuberant longs in OIL (and the correlations that could set off in Trannies in the US).. and the extremes in AUD positioning which reflect dismally on periods before major US equity weakness and we suspect things are set to change very quickly...