Approximately 100 SP handles lower as of Monday’s close, the New Year markets were shooting out of the gate off Global PMI’s..”....U.S markets only followed what was a concerted effort by Global markets already underway for 1 or 2 sessions depending on the region.(Germany up 5% now, Brazil, India >3-4%”. Soon after China rolled in and many emerging markets were on their way to double digit gains as of late February, ”China (Shang ‘index) getting on track... jumping 2.9%. Shanghai index was a wary noted yesterday. If this is the beginning of a reversal in the China market, it’s a very good sign for U.S markets to go higher as risky assets would rise out of better China sentiment’.(early Jan)
Now almost 2 months later to the day, it is the emerging markets garnering attention here with ie, Hang Seng, India, Australia, off 3-4% in just a couple of days in March. Simply, it’s garnering attention because it’s close to being the opposite of January beginnings as U.S markets followed emerging markets to the downside this time with an open down to SP support levels of 1348-1350.
“It (rally since Oct.) will probably end in a commodity linked led correction, but for now the market has shown resiliency day after day”, (02-26). So far the pullback is a reflection of emerging markets and the commodity link. On Monday, it was Basic resources, Base metals and today Precious metals got crunched into the open. The most notable ingredient for the fall is likely the end of massive doses of morphine from ECB as speculated into March, not China’s forecast. An added headwind caveat today is the 10yr yields in European peripherals on Greek swap concerns. LTRO tender aftermath should still hold these in check, so today’s move is a little concerning. ”…Overall, it (tender)won’t just a day thing market reaction, but instead will slowly play out into March as we still don’t know what ECB will do later as far as being even more ‘accommodative’. Even answers to ECB’s SMP going forward is now in question, another LTRO of duration is quite clearly off the table as confidence has been re-established”.
As of the market open, this is setting up to what was speculated here, a window dressing trade holding market into late February, a LTRO less ‘shallow pullback’ reaction early March and then positioning into NFP#. The only bump so far was the head fake reversal day last Thursday, which made upside risk likely and a shallow pullback unlikely ahead of NFP#. Instead a pullback resumed a day later and now is 3 days old.
Last Thursday before reversal day…“In all, the expectation was for limited upside >1370SP if reached and today is likely enough for a short term 'healthy' pullback. Let’s get it over with as the market has been fatigued, divergences playing a hand (yesterday’s lag note of RUT/transports included) and build back up to an NFP# on 09/03..”. Only drawback is the market is cutting it close to NFP# date by not giving enough time to digest week’s events/losses and the ‘shock’ of actually having a 3 digit DJIA loss after a ~45 day streak of not having one!;). A little wink there, but the market is spoiled and complacent.
Question now, is it better to wait on NFP#’s now or buy the dip now below broken support???. In all, technically the dominos have been falling for days, RUT>SOX leads to COMPQ/NDX> leads to SP,(now below 20ma benchmark), so its' price activity tensions here and in Global indexes causing selling and not the numerous excuses floating around for the slide. Being the case, dip buyers may stay away this afternoon, instead of showing off the market's resiliency as in recent past. Excuses can be bought, but its the price performance which is overshadowing things now. Still, if you believe in the recovery, it's hard not get in on a ~35SP move off highs in front of the NFP# sooner than later.