The cognitive dissonance continues with a blip market rebound into month- / quarter-end prompting remarks from many that the worst is over and it's new highs (for the Dow or S&P) from here. Last night's CCAR prompted more glad-handing (despite 6 banks being tapped on the shoulder) and while bank stocks are up at the open, they did not fare well the last time...
And while stocks rebound in early trading - the yield curve continues to collapse on its inexorable path to signaling slowing or no growth and the next recession (helped overnight by rumors of an ECB 'Twist').
But it is former fund manager Richard Breslow that sums up the glee into the July 4th week better than most - "you can still be happy... as I rain on your parade."
It seems positively churlish to read all the happy news gracing the wires, marvel at the sea of equity green, share the relief of the beleaguered emerging-market countries, whose assets are having a bounce, and conclude it’s good, but not enough.
It’s admittedly early in the day, but despite some impressive moves you would be hard-pressed to find any asset that isn’t still in very familiar territory.
Had the markets concluded, or even just got excited at the prospect, that the world had changed, you would have expected these reversals to have caused a lot more pain to traders riding the recent trends. In a world fraught with anger and hostility, this all looks remarkably civilized. And I’ve yet to hear anyone complain to me that liquidity has been a challenge.
Even the Shanghai Composite, reacting to soothing words from PBOC-related sources rose over 2%, and it did so in a steady manner without gaps. Just a textbook example of a trend day. But it failed to end positive on the week nor best last Monday’s low.
Double bottom from today’s low, to be sure, but no one who has been short this thing was carried out on their shield.
And although the euro shot higher as EU leaders strode happily before the press to declare victory at the save-Angela-Merkel summit, it, too, is currently at a price we’ve experienced three other days this week.
Give it some credit though, 1.15 versus the dollar continues to grow as very significant support.
The dollar index is doing similar things in reverse with 95.50 looming formidably above. But we have still spent the day within Wednesday’s range. As have the DAX, S&P 500 futures, EuroStoxx 50 and CAC.
Perhaps most interesting, 10-year Treasuries, bunds and BTPs have not broken away from distressing, and distressed, levels.
I’ve no idea whether today is the pause that refreshes or the start of something new. We are ending the second quarter with markets rife with ambiguity. The most that can be concluded is breakouts to new territory just don’t seem to be in the cards on this summer Friday. For all the fundamental news, once again it has been the technicals directing price traffic. Or maybe people are realizing that the biggest mistake that keeps happening is when victory is declared prematurely.