Just a month ago we broke above the magical 1,600 level on the S&P 500... today we broke back below, with the index now down over 5% from its 5/22 highs. From a technical perspective, the Nikkei 225 is below its 100DMA, and the Dow and S&P 500 just broke below the 50DMA. VIX has risen, now back above 18% (highest in over 3 months). No Hindenburg Omen signal (yet). What we worry about is that everyone is focused on tomorrow's NFP print as some panacea for "Taper." This is incorrect. The "Taper" jawboning from the Fed is because they are increasingly fearful of the bubbles they have created (just look at the sudden influx of frothiness discussions) and need to 'try' and talk us off the exuberant ledge. Whether the NFP is strong or weak is irrelevant - we all know the 'real' economy is weak - it doesn't matter to the Fed who can't support such disconnected markets any longer since they know that the higher it goes the worse it will end.
Fundamentally analyze this!!
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Whocouldanode?
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Wanna play a bounce tomorrow? Then it has to be HYG - which is now 9 sigma cheap to stocks and is down for the year... or just buy 3xHYG and sell 1xSPY for any reversion...
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Charts: Bloomberg