Buyer Beware
If 2 trillion can't get the market above 2500 on the S&P 500 even on a knee jerk bounce, it's going to be a long and bumpy road both in terms of virus health scares and the torrent of lousy economics to go before we see any real improvement, I'm afraid.
The only thing I see is disappointment across my network as the bounce wasn't big enough to fade which isn't a good thing for risk sentiment in my view.
But with both bull and bears alike hoping there's still, a caveat or two to come, the markets are stuck in no man's land with little meat for the algorithms to digest.
One positive in the order flow
But as far as the order flow suggests, maybe some solace to be had as system selling has stopped, and some small institution bids are returning the fold. But how long any of this holds up will significantly depend on whether the next express elevator ride takes us to floor 2700 of 2000 of the SPX.
However, with the VIX remaining sticky at 60, it most certainly needs to fall below 30 and only then to the real buyers' return. Still, ultimately none of that will happen until the data has bottomed and signs of life emerge around the world.
Jobless claims in focus?
But the lack of a pop on the stimulus packages does suggest it's going to be an arduous struggle to survive the US initial claims going ballistic.
The problem is new jobless claims will measure the extent of US policy failure, and with the Congress dilly-dallying, it will not help the matters.
Now market participants are bracing themselves for a horrific peek into their future this week when US initial jobless claims are released. The high-frequency data will undoubtedly confirm we're entering a vortex of the fastest and most substantial rise in the US unemployment in modern financial history.
In many ways, initial jobless claims will be the signpost that matters the most in the coming weeks as it will be a near real-time measure of whether fiscal policy worked.
Currency markets
The market has been talking about a possible deposit rate cut by the People's Bank of China. Still, it will be a big decision if announced and has not been fully priced in USD/CNH opened lower but has since retraced with CNH underperforming the basket today.
More positive risk sentiment in Asia continues to support high beta equity flow currencies like Korean Won. Also, the softer USD would offer some headroom for basket currencies like The Singapore dollar. Congress passing the Main street-friendly agreement has speed USD selling, where the hard-hit AUD also stands to benefit.
Indeed the Aussie continues to be the faders delight after plumbing the depths late last week.
Gold markets
A technical day in the markets
I sold gold on this today, but let me try to explain why:
Odd moves in gold as price action between the April and June gold futures contracts are attracting some eyes. June traded about $3-4 above the April contract on Tuesday but is suddenly at a $10 discount now, and this difference is widening. While the June EFP is not trading yet, any short EFPs out there are still being covered through the April contract against the spot market. April futures may solely be to square up short EFPs, and the real market (June) should reflect where it is headed once immediate EFP shorts are covered. The spot should remain relatively offered then. But again, the US stimulus stock market action may change that.