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Something Broke In Markets On Thursday

Something Broke In Markets On Thursday

This Friday is going to be a session for active short-term traders, and it will likely be unpleasant for investors.

Something broke in markets on Thursday. There are a few things that worry me about the latest bout of risk aversion. This is in context that I’ve been an unrelenting stocks bull since the December Fed meeting…

But now I’m uneasy…

The Thursday selloff confused people.

Initially, many blamed the comments from Fed’s Kashkari about there potentially being no US rate cuts this year.

However, a quick look at a few charts shows that (a) yields fell rather than climbed, so his hawkish lines did not impact, and (b) equities started selling off before his headlines.

It’s never a good sign when people struggle to identify why stocks have a relatively large swoon.

If an asset is weak without an obvious catalyst, it suggests that it can really get destroyed if a genuine risk materializes.

For good order, the weakness in E-minis coincided with the oil price rise that in turn followed the Netanyahu headlines.

We have key US data this morning at a time of vulnerability for the market in terms of the Fed narrative.

We’ve run a long way on the idea of the Fed being dovish despite a strong US economy.

We’re getting closer to the point where we must acknowledge that either the Fed won’t be easing soon, OR the economy is in more trouble than we thought.

It means that we’re in the unusual-in-recent-times setup where a big surprise in either direction could hurt stocks today.

(For clarity and consistency, I would only see this as a multi-week consolidation/retrenchment and not some long-term bearish turning point).

…click on the above link to read the rest of the article…

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