Markets and the coming reality trip: US Treasury yields up, oil up, extreme climate (global)

Markets have detached from reality, but this can only happen for so long and maintained on an angst basis (nervous trading HFT or otherwise), before the shitstorm kicks in again. In the meantime trades on oil (bullish) US Treasury's (bearish) is pretty much the arbitrage trade between equities that are supported by the US government and Federal Reserve.

But as mentioned any equity or stocks being supported via Federal Reserve money printing and US government statistics, is an angst ridden trade. Not impossible to short, as the patten of trading is usually selling on open and buy (melt up) on close, but not recommended. Short term hr by hr volatility on thinnish volume is the name of the game. But the main buy and hold trade are oil and gold and short UST's.

Until oil moves up (and maintains support) over $90 a barrel, and the 10UST goes up over 4.00%, then we may see some nervous trades move out of stocks and a long overdue correction takes place.

As discussed in Japan and China will buy EU bonds using their FX reserves with China inflation blowout crash all but imminent in 2011, a extra boost to a stressed out phase of inflation for China, will be the higher oil price . Which could be the $90+ oil crunch wipe out for China.

Japan says it will buy European debt via the European stabilization fund set up by the EU and IMF, crazy ass plan but more of a distraction, especially when Japan is a debt time bomb, shrinking population, a stimulus program that cannot be switched off and falling export markets. Eventually Asia, stemming from China will have a banking crisis dragging Japan in and shooting up Japaneses bond yields. This should then send Japan into a debt crisis as similar to European indebted countries.

But US Treasury's are heading upward on the basis that eventually the US economy will be faced with higher interest rates whether the US is falling into stagflation of outright deflation, the gap between economic 'recovery' and illusion will collide and the reality trip will be nasty.

And then there is the extreme weather or climate change, noted as Australia is experiencing their worst floods ( state of Queensland) in decades, the reality is now hitting home that the game changer on everything is your environment. Are we at an environmental/climate change tipping point? Who knows? But the US may just get hit by another snow storm on the northwest, with NYC going into another snowstorm less than 3 weeks.

Nature may have the last laugh.

Oil @$91.30, note the USD also leading upward. Good to watch for any oil shock on sudden USD weakness