Daily State of the Markets
Good Morning. Given that stocks came into the week in a very overbought condition, that just about everyone in the game has been calling for a correction, a pullback, or at the very least a "sloppy period" to commence, and that the situation in Cyprus appeared to give the bears the catalyst they needed to get control of the game, our furry friends have to be disappointed with their efforts so far.
Although there has been a fair amount of intraday volatility this week surrounding the headlines out of Cyprus (the S&P fell 13 points in about 15 minutes yesterday on word Cyprus's Fin Min had resigned and then dove another 8 when the country's Parliament rejected the bank levy proposal), it is important to recognize that the total damage to the stock market so far this week has been minimal. If my $8 calculator is functioning properly this morning, it appears that the S&P has fallen just -0.95% from Thursday's high point and the DJIA has only given up 83 points, or -0.57%. So, at least at this stage, we can't exactly call the situation in Cyprus a crisis for the U.S. stock market.
In terms of identifying the drivers of the current market action, we will have to stick with Cyprus as the frontrunner at the present time. Although with an announcement from Bernanke's bunch on tap today at 2:00 pm eastern with a quarterly press conference to follow, the focus could easily and quickly shift this afternoon.
Recall that equity and bond traders alike have been keen on any hint (subtle or otherwise) as to when the Fed might consider pulling their QE punch bowl from the party. The general thinking is that any indication that Bernanke might be thinking about making a move sooner rather than later could be a big problem for the prices of both stocks and bonds.
But before we get to the Fed announcement, the algos will be focused on the situation in Cyprus. As such, here is an executive summary of where things stand this morning:
So, while the drama is likely to continue and the algos will likely react to each and every headline, I think it is safe to say that so far at least, the situation in Cyprus is not (yet?) the debacle that the bears have been looking for. Stay tuned.
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Turning to this morning... Although all eyes are on Cyprus again this morning, the general thinking seems to be that there will be a resolution to the "crisis" in the near-term. As such, traders are likely to shift their attention to the Fed this afternoon.
Here are the Pre-Market indicators we review each morning before the opening bell...
Major Foreign Markets:
Crude Oil Futures: +$0.67 to $92.83
Gold: -$2.00 to $1609.30
Dollar: lower against the yen, euro and pound
10-Year Bond Yield: Currently trading at 1.934%
Stock Futures Ahead of Open in U.S. (relative to fair value):
Thought For The Day...You can do anything if you have enthusiasm. Enthusiasm is the yeast that makes your hopes rise to the stars. -Henry Ford
Positions in stocks mentioned: none
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