.. Does it make a noise?
With mood having been so grim for outlooks on Europe, US (PMIs) and of course China (hence iron and Aud falls) it has been no surprise to hear the call to sell risk persist. One only has to look at populist blog comments to see how that mood remains in retail with all rallies being called as a new gift of a sell. But apart from iron ore and aud recently, bears have been fighting a fearsome enemy - Price.
SPX new 4 yr highs.
IBEX up 33% in the last 6 weeks
Spain 10yr down to 5.80% from 7.5%
Eur/crosses generally up a lot over the last 2 months.
With Jackson Hole, the ECB first event risk behind us and a clue to NFPs being OK from the ADPs, there appears to have been a global bear capitulation on many fronts with even iron ore moving higher. The air has been thick with towels as even new bear fashions are squeezing up.
Iron rebar +5% today
Aud up 38.2% (magic fib) of its recent falls
All things China are rallying hard
Most strikingly someone has switched off eur/chf's 1.2010 electromagnet and it is motoring higher. Which some see as noise but we see as more of a sea change in expectations of the binary euro blow-up function, if not the underlying economics of Europe.
But whilst TMM are very happy to see a rebalancing and indeed their portfolios are glowing green and blue rather than red, there are some concerns that the race higher may not continue in Euro-land for much longer. The proliferation of bullish eur/usd calls hitting our inboxes this morning is one indicator that market bias is flipping to at least neutral and the recent data we see is indicating a market short of usds. Whilst we believe that some entrenched core bearish positions remain untouched we may not be far from the top in five-minute macro position adjustment. In periphery debt, specifically Spain, we have seen yields melt. The 10yr traded at 5.65% but Team Macro Man, though relatively bullish on Europe vs consensus feel that this capitulation is not the end of the road for grief on Spain. We will be writing more about that on Monday as we haven't time now, but suffice it to say that the bears may yet get a soft landing.
Or at least the bulls get better levels to buy on.