An active morning so far. ECB head Mario Draghi made comments about the willingness and ability of the ECB to act, causing full risk-on from 6:15 am to 7:15 am. After Asia closed mixed, and Europe was down small, here is the current state of affairs:
- SPX futures up 25 points from 1329 to 1354 over the course of an hour, now trading around 1349 (indicating a +1.2% open).
- Europe trading up more than 2%, led by Spain and Italy, whose sovereign yields are both 30 bps lower after the comments (back to where they were on Monday)
- Treasury bonds and the Dollar are lower, with the Euro’s daily high set at 1.2287. The 1.23-1.2350 area is important resistance for the Euro
- Commodities are broadly higher, up 1-2% across the board.
We all forget quickly. I have a hard time remembering market lessons from a month ago, much less 1 year or 5 years ago. And we end up repeating the same mistakes as a result.
I remember the 2007-2008 bear market very vividly though. Part of the reason why I’ve maintained my bearish stance in the face of rumors of policy intervention is because policy intervention in 2007 and 2008 was rampant, but it usually was only good for a short-lived rally. The longer-term economic downturn cannot be fixed so easily, and stock investors care most about corporate earnings at the end of the day. That downturn seems in full force, and will exert its force on the market through lower prices in the weeks to come. The featured image is appropriate. One white knight is staring down an army of black forces. The black is likely to prevail.