The month end window dressing/ FX hedge rebalancing-allocation chop trade continued with SP 1306 holding to create a close in the recent mid -range of the SP. The low volume trade may not be notable, but the ‘unsatisfactory conditions’ noted in the FOMC grew from today’s economic data. Since, (late last week), noted weak housing # GDP #, today Case Shiller, Chi PMI fell short of short of expectations demonstrating some momentum is waning. The idea of FED embarking on QE solely on weak numbers at this point is a somewhat careless trade. This seems to be occurring as market shrugs off the data and holds 20MA.
These recent U.S numbers bring into focus what sparked the rally at the beginning of the year.(Dec.Global PMI’s, inc. U.S' ISM). Those PMI’s set off the first trade of the year with Coals, Metals, Steels, Ferts’ all up 10-15% in January’....”Commodity linked stocks will be the beneficiary”. The bar has been set leading into January’s data and it might be a touch high. So far overnight, China PMI at 50.5 beat expectations and Europe’s was pretty well in-line with ‘flash’ data last week, the ES has spiked 10pts overnight with Europe rallying. If the PMI’s are the sole reason for the spike, it may be short lived with US data coming up given recent data points. Shanghai was still down 1% despite their number and downside risk in place if US (ISM, construction spending, ADP) doesn’t live up to expectations and/or the +10pt ES move.