I don’t model Fed moves and haven’t done a complete read of Bernanke’s papers and speeches, or a Vulcan Mind Meld on the man, but I can’t for the life of me figure out why anyone would think that lots of FFR rate relief (50 to 100 BPS in 07?) is either “needed” or forthcoming. I may be all alone here, but I think the odds of a 50 BPS move in the Discount Rate, making it match the FFR, is more likely than a full 50 BPS move in the FFR at the September meeting. Part of me wants to “sell the news” at the announcement (although I’m not going short again when my models are long), because I am sure whatever the Fed does will be disappointing to a large portion of the crowd, and the other part of me doesn’t want to miss getting on a departing train. Speaking of which, it looks like I should have been more nimble and set some price orders to get in yesterday. Oh, bother. In another, unrelated, “oh, bother,” the 250-day return model is flashing some lows it hasn’t seen in quite a while.

EZ trend for the 10-Year Treasury is up, as it is for the S&P 500. I think that a small fixed income position is warranted under such circumstances (bullish bonds and bullish stocks). Of the three BND positions tracked on the watchlist, the Treasury-tracking IEF has the slightly higher PPO signal, but HYG has the higher PPO histogram, about 250 BPS of divvy yield advantage, and isn’t trading at a multi-year high. Going long an approximately 10% stake in HYG.

Hmm, a resumed speculative mania in Gold? At the moment I’m unconvinced that it will last, but I’m willing to rent a position in the commodity to see if it makes it to new highs. Going long an approximately 10% stake in GLD.

I’m still of the opinion that the carry trade isn’t dead, and that it will resume in force as soon as the volatility surrounding the markets fades a bit (another opinion). After all, the interest rate and “economic a.k.a. G-D-P” growth differentials between countries haven’t changed. Of the CUR ETFs I track, the yield is highest on the Peso, but it’s not been a carry favorite, and besides, I think that most market-movers think that the Mexican “G-D-P” is too closely levered to the U.S.’, and the U.S. is expected to fall into a “Beartarded Great Depression” sometime before the next year is out. The U.K. Pound is next in yield, and very close to the Aussie Dollar, but to me, it seems that the Aussie Dollar has the advantages of higher-than-expected economic growth, levering to Asian growth, and possibly less financial exposure in their overall economy than the U.K. Another option that I seriously considered was the G10 Currency Harvest ETF (DBV), which approximates a 3-long, 3-short carry trade strategy. It was a tough call. Going long approximately 10% stake in FXA.

The other 70% or so of the portfolio will consist of equal portions (17.5% or so) long in China (FXI), Hong Kong (EWH), India (INP), and Oil Services (IEZ). Three of these are retreads that I was hoping to buy back cheaper after bad news, and the other is a replacement for South Korea, whom I think the market-movers think is too levered to the U.S. (see the above discussion on Mexico).

I’ll place market orders for the open tomorrow, update the the watchlist with fills in the evening, and probably set some stop orders and mark them on the charts.