After looking at futures indications last night, it wasn't surprising given that the Daily Wrap and some 2014 Factoids on Wednesday evening's gist and conclusion were,
"While I don't have any positive divergences outside the 1 min Index futures which could easily be wiped out overnight, there are more than a few short term signs of a 1-day oversold event which "usually" results in a next day bounce, however many things change when fear picks up with volatility which go hand in hand.
I wouldn't make any assumptions beyond I'd certainly look to use any price strength to sell or short in to, I would not try to chase anything to the upside, the probabilities are just too skewed to the downside."
We ended the day with a number of 1-day oversold indications from S&P and Morningstar group performance skewed 95% to the bearish side, to a strong Dominant Price / Volume Relationship that usually results with the next market day closing green on an unwind of the short term oversold event to several leading indicators, most interestingly was professional sentiment as if they knew the market would gap up this morning.
However, as clear as the 1-day oversold signals were in overwhelming fashion and as non-threatening as they are, actually I see them as an opportunity as I posted Wednesday in the last sentence of the excerpt above, I don't think they were entirely based on the oversold event, although the oversold event made them easily primed for a bounce. How long that bounce lasts, well we'll determine that today, it may not last beyond the afternoon, it may , watch for the Market Updates.
It seems the real reason in large part were more Draghi words and no action as he spoke to a German magazine saying, "the risk that we don’t fulfill our mandate of price stability is higher than it was six months ago" and...
"We are in technical preparations to alter the size, speed and composition of our measures at the beginning of 2015, should this become necessary, to react to a too-long period of low inflation. There’s unanimity in the ECB council on that."
Reuters (of course) spun this in saying Draghi gave "Clear Indications" that outright money printing was imminent, of course hinting at QE.
However for anyone who has followed the ECB they know "A" Draghi does a lot of talking and not much acting and "B" there's virtually no unanimity on the ECB governing council, just a month ago it was widely reported Draghi had a near mutiny on his hands and there's far from unanimity on the governing council to support QE, but that was not what Draghi said, that was Reuters "usual" spin, what Draghi said was the ECB stood together in combating deflation.
And to this effect the EUR/USD did this overnight just like last week...
Which of course means...
The Index futures follow pretty much in lock step and that has how we've arrived at this morning's open, on more Draghi jawboning and a market that was in a deep 1-day oversold condition that was ready for a bounce with or without Draghi.
Even in the fiercest bear markets there about as many up days as down days.
While US markets have gained some ground from the above chain of events, interestingly European markets are about as close to dead flat as you get without actually being at 0% on the day. In addition to no gains, the Flight to safety trade in European bonds continues, especially in the periphery with yields hitting record lows for Italian, Belgian and Portuguese 10 year bonds.
Given just what we saw by the close Wednesday as the market was flashing strong 1-day oversold signals, it's no surprise as was posted in Wednesday's Daily Wrap and even less so with Draghi jawboning and Reuters spinning.
Yet you'd do well to remember how short the half-life or reaction to Draghi comments is as the market is familiar with Draghi talking, but not acting.
So we'll move forward this morning and the rest of today as usual, watch the market for signs of opportunity and go from there.
Given just what we saw by the close Wednesday as the market was flashing strong 1-day oversold signals, it's no surprise as was posted in Wednesday's Daily Wrap and even less so with Draghi jawboning and Reuters spinning.
Yet you'd do well to remember how short the half-life or reaction to Draghi comments is as the market is familiar with Draghi talking, but not acting.
So we'll move forward this morning and the rest of today as usual, watch the market for signs of opportunity and go from there.
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