Overnight the main event was pretty silly, but a Tokyo professor by the name of Takatoshi Ito, who use to be a deputy at the Japanese finance ministry, said overvaluation of the yen versus the dollar has been corrected, that in turn sent the USD/Yen plunging overnight and right through the $101 support to a low just over $100, ironically there has been a small "W" that appears to have put in a temporary bottom for the time being, however this took all risk assets down with it, for instance, ES....
In any case, since the USD/JPY, which as I said yesterday "is all that matters for risk markets now", has put in a small "W" bottom, ES has put in a positive divergence and is starting to reclaim some ground, this in itself could require a small base, not necessary, but could.
Europe didn't help matters, but this was more about sentiment already having gone south so it didn't matter what came out, but the European April unemployment rate hit a new record high of 12.2%. Then some comments that the ECB is ready to intervene on rates and will consider all measures to maintain credit conditions sent the EUR lower, which is largely irrelevant to risk recently, whereas it use to be the main driver with nearly a 1.0 correlation. There were some good economic data too and more banks scheduled to pay back their LTRO loans, but as I said, sentiment already went south, this is why fundamentals don't matter, valuations don't matter, everything in the market is sentiment. You are better off majoring in psychology than economics if you want to be a trader.
Actually, I'm off, something just sent ES 3C rocketing higher....
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