Traders "Are Doing Their Best To Ignore How Weak The Rest Of The World Is"

Much is being made of the modest bounce (a couple hundred Dow points ain't what it used to be), but while this week has been extremely volatile, as former fund manager and fx trader Richard Breslow notes, "the big moves this week actually tell us very little."

With so many ill winds blowing, Breslow notes that it makes some sense that traders don’t want to be caught out on a limb. Watching today’s price action and these, almost, end- of-week levels it all smacks of traders trimming back positions that have been working the last few days. I wouldn’t read more into it than that. Other than to note that if asset prices don’t go out at any of the extremes we’ve seen this week, it implies that these latest moves haven’t created new themes that investors just can’t bear to live without.

Via Bloomberg,

Given the noise level we’re experiencing and the conflicting headlines buffeting assets and emotions, I get the strong sense that traders would like to put this one in the history books early. Fridays, after a busy week, can go either way. Render traders impervious to the latest whatever, or make them hyper-sensitive. Today feels like it’s the former that is the hoped for outcome. Now we’ll see if events allow that to happen.

You’ll hear a lot about equities and their 200-day moving averages. Which have mostly been under threat this week.

Dow futures have bounced back above theirs. As has the much maligned Nasdaq 100. S&P 500 futures have spent the day pirouetting around the level, which interestingly enough is pretty much in the middle of the day’s range. The Russell 2000 is unambiguous. It broke below earlier this week with brio, and is trying to look for support. Which, perhaps significantly, is very close to yesterday’s lows. Although, that’s putting it on a pretty tight leash.

Where these indexes finish the week will have significance for traders. Right up until we open on Monday.

Traders hoping we hold these lines will do their best to ignore how weak other global equity markets continue to look, despite today’s bounces.

Chinese shares will be scrutinized from the get go next week, but keep an eye on the DAX. Especially to see how it reacts to however this weekend’s Bavarian State elections turn out.

Ten-year Treasury yields are back near a no-man’s land. But yesterday’s move looked to be positioning panic rather than a convincing rejection of recent highs.

Watch 3.20% and 3.12% to give an indication of where sentiment will lie going into next week. Just for the fun of it, I’m using 3.19%-3.15% for the close touch.

As for the dollar, it is simply not in play at the moment. It has so many conflicting forces working for and against it that it has chosen to be exactly in the middle of the range that has existed since the end of the second quarter.

Anyone claiming there are significant technical signals pointing to its direction are torturing the data. However, if I was forced to, and I can’t resist, I’d say that it’s easier to make a technical case for it to go up from here.

And just as a reminder, if you are tempted to trade oil futures today, use the S&P 500 as your guide, not some unhelpful guesses about supply and demand.

Have a good weekend.