Events were breaking yesterday, but as Bloomberg's Richard Breslow mocks, not nearly as quickly as the narrative that tried valiantly to explain the price action.
After the fact. We all know what happened. The Italian referendum sent the euro and risk into the sewer in the hours following the result.
Everything stabilized smartly when European markets opened and liquidity was there to be had. Then the Christmas mindset took over and markets decided the calendar was, for now, temptingly free of known black swan events and it was off to the races.
From a trader’s point of view, it was much simpler. They did all the obvious trades they thought they were supposed to do. Added at chart points that screamed lighten up. And then got their eyes ripped out. Why should December break the trading patterns that have played out so many times over the course of the year?
So far we’re on familiar ground. But what struck me was the speed with which the ECB story spun out. Not insignificant ahead of an impending governing council meeting. And one President Draghi will be unlikely to skate through with “mañana”.
We began with Italy and maybe the whole of Europe is in deep trouble. So horrid, at a time when monetary policy is losing its effectiveness. Followed by, buy-the-dip with both hands Eurex action which prompted shamefaced talk of the Draghi put. “How could we have forgotten"? Only to be succeeded by sombre warnings of the impending taper. Capital key changes to tapering at warp speed.
This has been a momentum-driven market rather than one driven by well-reasoned fundamental analysis. It’s amazing what pseudo-intellectual havoc can be caused by a couple hundred points bounce in the DAX and euro.
Two things have indeed importantly changed, however:
1.The charts look very different today. Once again being short EUR/USD near 1.05 has been painfully expensive. Quintuple bottom? The re-test and utter rejection of the 200-day moving average in EUR/JPY is also impressive.
2. The bar for a market panic on any mention of a possible tapering, or even the mere theoretical discussion of a future tapering — no matter if surrounded by APP extension and the like — has been lowered. Markets are on bond yield edge. If global rates continue to nudge higher, those pesky economics models will see inflation expectations lurking everywhere.
The post Trader Exclaims “Markets Are In An Alternate Universe” appeared first on crude-oil.top.