Thursday, January 22, 2015

Risk ON

The sell the news reaction never really came.  It is clear sailing aboard the ECB QE ship.  Greek elections will be anticlimactic as the Germans will cave into Grecian blackmail via the Syriza party.  Over the past 3 weeks, we have seen sufficient derisking of assets and jitteriness ahead of events to leave room for a relief rally from here till FOMC meeting next Wednesday.

The European equity indexes have been rallying for a week now since the SNB bomb was dropped in anticipation of today's news.  But it still has more room to go higher, as a large portion of the investment community was waiting for absolute confirmation to buy stocks.  Draghi delivered. Now that we have the uncertainty out of the way, and we're intermediate term oversold, you will see the market edge higher towards SPX 2060-2070, the last time the market rally took a pause before dipping again.

It seems like the VIX is finally deflating now that the ECB meeting is out of the way.  Unlike the previous rally, this time, VIX is actually following the usual script and weakening as stocks rally.  Another positive.


Anonymous said...

Whats the floor on the euro?

Market Owl said...

I Think we are very close to a bottom. Euro should rebound strongly when market realizes that Fed cannot raise rates.

Anonymous said...

Whens that supposed to happen? Fed meeting next week?

Market Owl said...

Yes, that would be a start. It will take time though. I dont texpect a V bottom

Anonymous said...

FXE calls at close to 110 could be the floor for euro.

I'm waiting for TBT to go below 40 for the calls but that will also be fat.

Crude looking to make fresh lows here, RUSS could be a fat trade today into next week.

BAC calls back at 15 would have been fat.

Market Owl said...

I am waiting for new lows also to put on a short term trade long crude. Less interested in a euro long.