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Why The Rally Just Fizzled: Draghi's "Puff" Was Not Enough
Confused why the blistering rally off the open following Draghi's uber-dovish commentary has faded? The following note from BMO's Mark Steele may explain it.
Not Enough Puff
This morning, Draghi adjusts QE to continue to puff up the ECB balance sheet. That’s helpful for global risk markets, but it’s not enough. Globally, the net figure shows central banks are blowing out their reserves;
- That puff peaked last August – Figure 1 top.
- Pricing on investment grade corporate credit debt peaked and started to turn lower that same month – Figure 1 middle, and Figure 2.
- Then finally equities took the blow - Figure 1 bottom.
When mama's credit market ain’t happy, eventually ain’t nobody happy;
- That global corporate bond index in Figure 1 is trending lower at an annual rate of 6%/year – Figure 2.
- Commodities, which didn’t really make it onto central bank balance sheets, have been in a bear market since 2011. They are falling at an annualized rate of 17%/year, and that’s ex everyone’s (yes ours too) focus on crude oil – Figure 3.
So, unless we see a turn in the synchronized bear trends in credit and commodities (and we are always looking), we’ll continue to frame many of our buy ideas in the relative and short-sale ideas in the absolute.
* * *
And this is what next: what goes up on no volume and in lockstep with crude oil, comes down harder and faster and on heavy volume:
With Russell 2000 and Nasdaq in the red now:
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RTFR - RAISE THE FUCKING RATES
EOM
Remember Bernanke's "shock and awe" campaign(?)
It was suposed to be too big to fail. If everyone knows you have a bazoka in your pocket it is likely they will want to see you use it.
Only water gun toys in his pocket.
STFR - SELL THE FUCKING RALLIES!
Speaking of selling anyone notice the dow today?
Well tsk, send Draghi out naked and on fire, that would certainly improve MY outlook.....
Forget this now, sugar is rallying 6%. But you need something to put sugar on. Coffee, buy coffee, buy coffee now
Buy as much as you cant stand the jitters and then double it
still time for another pump n dump n pump
Who cherry picks the spread on these charts? For christ sake a one point move is blown out of proportion, the S&P is primed like a slingshot to go up 500pts by the weekend.
I think you are looking at the WTI scale
<\sarc>
Shemitah Wipe Out! With some music to go along with it!!!
Moar loosening of the bowels of central banks.
And it's gone.
https://youtu.be/-DT7bX-B1Mg
Nothing sticks. They can tinker with WTI all they want but nobody believes the prices are a reflection of anything positive.
Commodity currencies aren't being bought. Every dip against USD is bought right back and more money flows into USD.
Wouldn't be surprised to see a CAD / AUD / NZD peg to USD at some point in the not too distant future. To fight the loss of purchasing power in these countries alone and to give USD more weight against RMB.
<GTFO Before close today
<Stay long over holiday weekend
Black Friday?
China closed and ready to hit the sell buttons Sunday night?
Well 3:30pm today should be one hell of a show. Either 10% up or down, who the fuck knows.
Just turn off the machines.
If this was a computer program in your company fucking around with your pricing and orders like this, you'd bash it with a baseball bat and fire whoever came up with the idea to use it.
I'd like to find people that can tell you with a straight face that 5% daily swings up and down in oil prices is normal.
"you'd bash it with a baseball bat and fire whoever came up with the idea to use it."
Thank you for the much needed laugh.
Kind of like the Province of Ontario's Government. If a private company attempted to operate in the manner they do, and they went to a bank for financing - they'd get laughed all the way into their car and pointed at with loud guffaws while they drove away.
I'd prefer to bash whoever came up with the idea with a baseball bat, then set the computer on fire.
What sense does it make to discuss the activity of random algos in such depth?
Makes sense if you need to fill space on the website
Maybe Tyler has an algo driven robo text generator doing these stories.
Maybe the rally was caused by a fund using last months algo software. BTFD routine had not been deleted yet.
Maybe I should STFU.
According to MarketWatch.com:
http://www.marketwatch.com/story/panel-of-ex-fed-officials-say-no-rate-h...
Panel of ex-Fed officials say no rate hike will come at September meeting
Published: Sept 3, 2015 1:46 p.m. ET
By Greg Robb
Senior economics reporter
The global economic outlook has worsened since the Federal Reserve’s last meeting in July, which will lead the U.S. central bank to hold off on lifting interest rates in September, a panel of former Fed officials agreed Thursday.
The global economic situation has deteriorated and “not by a trivial amount,” said Joseph Gagnon, a former Fed staffer and now senior fellow at the Peterson Institute for International Economics.
Global stock markets are down 5% to 10% since the Fed last met, and the dollar is up 2% on a broad trade-weighted basis, he noted.
“The Fed has cultivated this recovery so carefully, with such enormous effort, for over the last seven years — are you really going to take the risk in this environment with unstable global financial markets and real macroeconomic questions about the global outlook that are not just about volatility?” asked Julia Coronado, chief economist at Graham Capital Management .
The former Fed officials spoke at a panel discussion sponsored by the Brookings Institution.
Jon Faust, a professor of economist at Johns Hopkins University and a former adviser to Chairwoman Janet Yellen, said Fed officials will delay, awaiting the “macrosignal” behind the recent market turmoil.
Donald Kohn, who served at the Fed for 40 years and ended up as its vice chairman, said two things would make him hesitate to hike rates if he were voting at the September meeting: very low inflation and low market expectations of a September move due to recent market volatility.
Kohn said he would want the Fed statement after its September meeting to stress that rates will rise before the end of the year. “That will help build in the expectation of higher rates later this year and put that in the markets, so when I finally did move it wouldn’t be such a surprise,” he said.
Fed officials have argued that the timing of the first rate hike doesn’t matter as much of the path of interest rates. They have stressed that the rate path is likely to be a gradual one.
Coronado took issue with this, saying it was “not entirely true for the markets that translate Fed policy.” A September move would be a “big surprise” and viewed as a “policy mistake,” she said.
Coronado said there were less than 20% chance of a rate hike in September. Gangnon, Kohn and Faust said the odds were higher but still less than 50%.
So, who leaked the jobs report this time?