The initial exuberance over Draghi's actions (and promises) faded quickly with Treasury yields falling and the EUR surging back higher (to close at 10-day highs)... but thanks to sterling work by AUDJPY and some well chosen 'I'm not scared anymore' comments from David Tepper, US equities soared in a world of their own (as VIX dropped). Volume was also heavy (but the siz came on the downswing after the initial jerk higher from the ECB). The Russell 2000 soared ~2% (best day in 3 months), Treasury yields closed lower, the USD closed lower (as EUR surged) and unchanged on the week, and gold and silver jumped. VIX also helped to support stocks at it dropped modestly (but remains notably disconnected from the equity exuberance). NFP tomorrow... time to sell vol for sure!!
What's wrong with this picture? EUR (the most critical indicator of Draghi's ability to improve his region's competitiveness by any means) surged as he disappointed... but US equities couldn't get enough...
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Draghi disappoints - EUR pushes up to 10-day highs
[6]
Who couldanode that EUR would rally?
As we noted earlier, [7]absent launching full scale QE, which it won't, the ECB's announcement will be a disappointment which means the EUR will ultimately move higher after a kneejerk lower as the market forces Super Mario to do even more next time. As Bloomberg adds, a cut in refi and deposit rates is fully priced in and latest price action suggests investors brace for disappointment if ECB stops short of signaling asset purchases or other liquidity measures to combat deflation
As an FYI - Russell & Nasdaq are up 6% from the lows the day after Tepper said
- *SALT: TEPPER SAYS DON’T TO BE TOO ‘FREAKIN LONG’
- *SALT: TEPPER SAYS I AM NERVOUS, IT’S NERVOUS TIME
and now
- *TEPPER SAYS MARKET CONCERNS HAVE EASED, CNBC SAYS
[8]
The Russell was on fire... it s best day in 3 months...
[9]
AUDJPY (and NZDJPY) were in charge as EUR and USD had their own Draghi issues to deal with...
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VIX remains decoupled as it can't break to record-er lows (even as realized vol leaks to record lows)... todday's action did have high correlation to VIX though...
[11]
Treasuries decoupled dramatically...
[12]
The EUR strength pushed the USD Index back to unchanged on the week...
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Gold and Silver pushed higher and oil dipped and ripped...
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Charts: Bloomberg
Bonus Chart: Goldman's June 2015 1950 Target for the S&P 500 is within 9 points... 11 months early...
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Bonus Bonus Chart: Did The Market Just Discount The Entire Taper'd Fed Balance Sheet?
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