Thursday, June 5, 2014

Draghi Delivers But...

Well, Draghi brought out a lot of bullets here, he surpassed expectations, but I'm sure he's not too happy about the euro/usd reaction, initially going down and then back up.  There is inherent strength in the euro, and the only way ECB can weaken euro long term is to do direct monetary interventions, buying dollars and selling euros.  Or do a QE.  These half-baked measures don't get the job done in these times of currency wars by central banks.

A bit surprised by this muted up move on Draghi's announcements, I'm sure there was some sell the news involved here, but it seems more like the market keeping with the theme of low volatility on both the upside and downside.  Market doesn't want to go up in big chunks, it spreads out the rally over many days, and in small bite sized bits.

Still think this thing grinds higher into next week, but the clock is now ticking, now that the bull catalysts are mostly used up.  Still think bonds can go a bit lower, but likely today's 10 yr 2.64% yield high will be hard to break.  The nonfarm payrolls should be a yawner, I don't expect anyone to make any big moves based on the number.  Sold ES and now neutral, waiting to buy Treasuries on any dips going forward.


MM111 said...

May be exhaustion but would not be surprised if we really start going up hard from now.

Market Owl said...

Any more rally after today will be exhaustive and be taken back quickly during the next pullback. I am looking for a top in the next 2 weeks. Would like to narrow the time window so I can time a short better, but tops are hard to time.