Ahead of the open, (27-07)

Verbal  intervention from ECB soared equity markets as sov’ yields tightened and EURO surged.  It seems FED has pushed ECB as speculated following WSJ story with Novotny/Draghi coming to forefront immediately after, ..”. and importantly put pressure on ECB to do something on 02/08”.   At the end it’s only verbal intervention and market is not really falling for it yet despite the surge. At this point it is only short covering.   If these comments are not refuted to any degree in the next few days by senior officials from say Germany/ ECB, the market should climb further and through summit highs.

 

  

In all, verbal intervention is keeping a floor to the market as discussed all week.  Today the upside risk/fear factor of being short and faced with a market surge was the reality as ES surged ~20 ES handles before open…..“The upside risk of action is keeping a floor to the market as shorts don’t want be involved in another upward surge”.

  

   

Debate will commence if anything new was said by Draghi, just like Bernanke’s every word goes through analysis time after time.   What’s important is his strong language is setting the bar higher for ECB to do something worthwhile on 02/08/.   Anything less (underwhelming) will now will be a market disappointment and there are limitations abound. (ie.within ECB mandates).  This is the problem now.   Again, if Draghi’s comments are corrected in any manner to let the market know expects too much, we’ll have large intraday swings before the ECB meet up.