The reason is, we've had 4 Central Bank actions this week, 3 overnight and in to this morning. All 3 actions were surprises in some way, anytime over the past 6 years, even one surprise rate cut would send the market rocketing higher, but 3 surprise rate cuts, I believe the last time I remember that happening in a day was November of 2011 (I'm not saying that's the last time it happened, but the last time I remember) and boy did the market move.
The easing was in China with the PBoC taking its second policy action this week with an increase to the maximum amount of overnight and 7-day loans that its local branches can make to financial institutions by $220bn yuan bringing the cumulative total of overnight and 7-day loans to $340bn yuan. Overnight loans can be made at 4.5% and 7-day at 5.5%.
Next the Reserve Bank of India swooped in with a surprise cut a few days after haven been given legal authority or a mandate to target inflation with their second rate cut in as many months. The Sensex initially popped higher on the news to an all time new high and then closed red, even with their currency down .4% on the day.
Finally Poland comes out with a surprise as it cuts rates making this the 23rd easing action of 2015 globally. Poland's central bank cut more than the expected 25 bps to 50 bps bringing the 7-day rate to the lowest on record at 1.5%, stocks initially sold off on the news and then recovered. The Lombard rate stands at 2.5%, the Key Interest Rate at 1.5% and the Deposit Rate at .5%.
The point is very , very simple, with Futures sliding all night as seen below...
If the market can't rally on 3 surprise easing actions in a single day, something very big has changed , I guess you'd call it a change in character.
Despite the weakness I expect and I don't expect surprise easing to bounce the market for long, a day seems to be about the norm now, but if it doesn't bounce it at all, I think we have a much more risk off environment than what the averages reflect just like Appaloosa'a cutting of major positions like AAPL completely and lowering equity exposure by 60% in a single quarter is something you don't see on the surface, it's those type of things that chip away and the foundation or support until you simply have a sinkhole style collapse.
We'll see shortly.
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