Market muddled along throughout the day and that’s a positive in this view, as ‘digestion’ is a necessity of huge rally day. Today, Bears ranting is in full gear about reality setting in, market exaggerated the concerted intervention and what goes up violently can turn just as violently down after realization this is only Central Bank band –aid.
No disputing it’s a band-aid. But, view here is the move justified. Macro and technically. If you put enough band- aids on as has been happening this week with more likely to come, it will eventually stop the bleeding.
Also, considering market broke down from mid 1200’s on the SP for 6-7 days from USD funding stress, why shouldn’t it go back to those levels when the band-aid is a specific ‘fix’ liquidity injection for that problem!
Technically, going to mid 1200’s is not a surprise after blowing through breakout levels…(Although, most are looking at low 1200’s,(50ma) as the breakout level to a broader recovery to mid 1200’s for SP, it’s been noted here recently 1215’ish - DJIM benchmark 20ma(1225) would be a hurdle on a bounce.). The next “R” is at 1265 on the SPX ahead of a NFP#, which is probably the most anticipated one in months with 180-200K eyed now. It’s unlikely anything out of Europe on Friday can upstage this report, so market direction will stem off what is happening in U.S for a change.
If, NFP# hits close to the 200k whispers or above, the market better mood/ sentiment continues and it may ignite the afterburners, which would coincide with the Europe peripheral bond tear today. In all, it may be short lived though because it’s not just Wednesday >4% rally that needs digestion, it’s the week gains Monday that need to be ‘consolidated’. So, either way the NFP goes, market probably needs some rest soon before all focus turns to EU/ ECB summits next week.. again