Tuesday, July 07, 2009
Sigh. It looked like it was so on, baby, but yesterday proved to be something of an anticlimax. The opportunity hasn't been bungled quite as painfully as Mikey blew one of his; rather, we seem set to tread water until the earnings flow begins in earnest.
Still, there were a couple of notable features about yesterday's session. Stocks initially popped on the better-than-expected services ISM, but swiftly lapsed back towards the low of the day. That, at least, appears to be something of a sea change from price action of the past few months. The market sold off pretty hard to bad employment data on Thursday, and wilfully shrugged off good news yesterday.
What does that suggest about the underlying nature of the market?
Indeed, it took a late-session squeeze from Team 888 (the re-incarnated version of Team 1250, perhaps?) to engineer a positive close on the day.
Still, it looks like despite the optimism of institutional equity investors (try and get your hands on the latest piece from CS' Andrew Garthwaite), the momentum of economic surprise has waned considerably. Citigroup's US economic surprise index has finally started to lurch lower; as this series is both serially correlated and mean-reverting, it suggests that we should expect the tone of US macro data over the coming weeks to be poor.
Perhaps Team 888's mettle will receive a sterner test, and soon.
Elsewhere, today marks the end of the ECB maintenance period, so we should find out this afternoon whether they'll drain much of the recent "wheelbarrow tender." Strangely enough, much of the €442 billion uptake has found its way back on overnight deposit with ECB, presumably to await future liquidity needs.
'Twill be intresting to see what happens if the ECB drains (or doesn't drain) some of this liquidity. One could argue that the reaction of the euro and European equities (particularly banks) should be inversely proportional, though that ascribes a level of rationality to the market that Macro Man isn't inclined to extend at the moment.
In any event, perhaps it's irrelevant. Maybe we're stuck here until Team 888 gives up the ghost.