In the lead up to the trading day, concluded with, .”Wednesday will interesting to see how market digested the FOMC/ Stress results overnight. A Gold/ TSY sell off continuing will answer the question, so watch these in the morning. A reversal in these 2 would indicate the market got ahead of itself”.
As of market close, those in the safe haven’s of Gold/ TSY’s are licking their wounds together for another night. A dramatic commodity (gold) crumble to multi month lows was upped one by an even larger 10yr TSY sell off, which broke key technical levels (200dma) after staying sub 2% for months. This is all the chatter today, thus leaving equities to quietly digest the previous day’s stock market surge. Once the morning cliff diving resumed in Gold/TSY’s, the expectation for equities to hold (as above) for the day was in place. Any shorts getting the Tuesday ‘rally’ news late, covered quickly in the morning pushing SP to 1339.42 (day high) and that’s literally all there was for the day as equities traded sideways till close. Still, a fast move like we’ve seen in TSY over the last few days has the potential to put fear in the equity market, hopefully it quiet down rest of week and signifies growing optimism on growth and realization of less QE. QE possibilities have kept a bid to TSY and helped out stocks, as we all know.
If there is anything the Global markets have become complacent about it is ‘everything’ being in sync with different asset classes. The FOMC changed all that in Gold/TSY’s at 2:15pm yesterday. The SP has left many sidelined week after week as it climbs and climbs, one reason is the Bond and Gold markets were not supporting the risk appetite shown by equities. What has seemingly occurred hastily is a price removal of QE3 additives that is showing up in Treasuries(bonds) in U.S and even in Europe’s safe places (Germany/UK).
All in, don't forget at these lofty levels, we will start to think about month end/ Q end soon enough to keep equities in further demand. A lack of relevant eco’ data till April should also keep stocks in check as the debate between ‘economic growth optimism’ vs. ‘QE’ seems to playing out since FOMC in favor of positive growth expectations in the U.S.. Hopefully, any tier 2 data hiccups before April data will be looked at as just a bump and further consolidation of better than expected data we've seen for months.