A tale in five bullet points

It was the best of times, it was the worst of times, it was the age of vicious sell-offs, it was the age of face-ripping rallies, it was the epoch of surprising hawkishness (BOC), it was the epoch of surprising dovishness (COPOM), it was the season of light, it was the season of Darkness, it was the spring of hope that oil would bottom, it was the winter of despair that it dropped another 5%, we had buying opportunities before us, we had a falling knife to spear us, we were all going direct to Heaven, we were all going the other way- in short, this period is so like a normal market, that some of its noisiest authorities insist on its being received, for good or evil, in the superlative degree of comparison only.

There's a lot to mention and Macro Man's pressed for time, so he has to resort to a few bullet points:

* The publication of yesterday's little ditty captured the low of the day pretty nicely.  For the first time in the entire downmove, the SPX has put in a bullish candle, in this case a hammer at the lows.  If it were ever going to mount a rally, now should be the time.

* Macro Man has been asked a few times in the comments for his view as to whether this is a correction, a crash, or a crisis.  For now, his view is that it is a correction and a targeted, not general crisis.  For one thing, earnings continue to remain near their highs, and expectations (which were marked down this time last year) have edged higher.   While one might wish to pooh-pooh the utility of earnings expectations, Macro Man has found them to be very useful, particularly in the absence of other alarming signals from his model (which is still bullish, by the way.)

All this having been said, there is clearly a crisis in certain segments of the global economy, namely oil producers and some other EM.  History suggests that such crises can generally remain isolated; however, we've never had a crisis where the countries in question owned so many foreign financial assets.   Common sense dictates, therefore, that one keep an open mind and that confidence in one's view should be somewhat less than usual.

* Fiscal dominance in Brazil?  The COPOM's failure to hike would suggest that Tombini believes so.  As a reminder, Brazilian CPI has risen another percent since Macro Man wrote about it in September.  Today's reaction in BRL will be fascinating.  It should get curb-stomped on the lack of real interest rate protection and the notion that Dilma is wearing the trousers, so to speak, when it comes to setting policy.  That USD/BRL has crawled quietly higher in recent weeks would suggest that positioning is probably not too big.  On the other hand, a rally in global risk assets may lift even the smelliest of turds, as indeed it did when the BRL closed higher versus the $ on the day that Levy confirmed his resignation as FinMin.  Gun to the head, Macro Man would guess that USD/BRL gaps higher and then dribbles down, though of course that's predicated upon the SPX following on from Wednesday's closing rally.

* Fun trivia fact: including yesterday's New York close, USD/CAD has rallied 13 days in a row.   Since 1990, the previous largest winning streak was 11 days, in early 2001.  Perhaps not coincidentally, that was when USD/CAD was on a long slow journey to 1.60.  It's kind of amusing how USD/CAD shrugged off yesterday's relatively hawkish BOC statement but fell out of bed when Spooz mounted their late day recovery.

* Yesterday's ECB "sources" story on MNI downplayed the chances of any policy shift at today's meeting, but it would be a stratagem worthy of Machiavelli id Draghi were to plant such a story and then deliver the "missing" easing from last month.  Then again, it was "sources" stories that first hinted about pushback against Draghi's dovish agenda within the governing council, which of course produced last month's ECB fiasco.

Still, Macro Man wouldn't lay odds on an unchanged ECB, because unlike last month the asymmetry is clearly skewed towards the upside on even a modest policy action.   Assuming that they do nothing, however, it will be fascinating to see what sort of tone Draghi takes.   Is he resigned?  Defiant?  Nonverbal cues may well provide a useful hint for how the March meeting will shape up.