Too Much Of A Good Thing – Markets
Have you ever eaten too much of a good thing that it made you ill ? Or when someone offers you a deal too good to be true that it made you wary ?
That is what Draghi and gang did to markets.
When you start cutting rates without much cause to and when economic numbers are starting to improve, suspicions on the true state of the economy will arise. When US GDP numbers are picture perfect but you start to notice things like inventory build up, it means you are fatigued of good news.
I had a pretty good laugh reading the market coroners’ reports this morning on the sudden and collective change of hearts and minds in the market within 30 minutes of the ECB and BOE which started initially with euphoria, as usual which followed through to the 3Q US GDP numbers at 930 pm, which looked great on headlines at 2.8% quarterly growth against expectations of just 2%.
Then it all started coming off in a frenzy, wiping out the EURUSD, the USDJPY, Gold, S&P and even USDCHF rallied on the day for there would be no flight to quality. USDNOK rose the most, a whopping 1.5% rally.
All sides were wiped out, whether you were long or short, for instance, Gold rose to 1325 which would have triggered stops before dropping to 1296, triggering stops too. USDJPY rose to 99.41 at 10pm before crashing down to 97.62 by 2 am.
Some reports described it as the horror of being caught wrong sided on both counts. Some say it is still a total mystery. Some say it was bulk flows that the market was unable to cope with.
I say, I am glad I decided to have an easy week because I was uninspired and it looks like I am not the only one feeling that way after yesterday. And if you ask me what will happen today ?
I think it will be more of the same and people are just tired of the rally and looking for excuses to exit.