Watching the late day surge on Tuesday on a 'Greek pledge’, followed by a further overnight ES surge on recycled China pledge news of support to Europe and you’d think the market had fallen victim to another form of ‘L’insanity'.
The Greek pledge is irrelevant as all is pointing at a ‘loss of faith’ to keep its word, even a push towards a default/ Euro exit, while the Beijing pledge was not ‘material’ or worthy of the 8-9ES spike as noted ahead of the open. Simply, the market was exhibiting hot- air exuberance on non- ‘catalytic’ events. As pointed out recently, the market has likely discounted all eco/earnings/ Eurozone good news and so with little to extend gains on, it begins to make up news as above.
The irrational movements were likely a signal of the rally becoming frothy and led to the sequence of events (below) into the noon hour sell-off start.
The run up to last year’s highs has likely run its course for the tired market at this point. Dip buyers should be reluctant to step up following today’s events until 1333/1327 is first reached.