Is the market 's attention span becoming shorter, or is an abundance of news and opinions providing conflicting inputs? Yesterday afternoon, the FOMC report initially provided comfort to the equity bulls and dollar bears, but the attitudes quickly changed. Extending the time frame for the purchases by the Fed of mortgage backed securities and agency paper by three months is hardly a market breaker but the markets retreated, leaving the possibility of key reversals in both the euro and equities. Markets like people often do what they want to do.
This morning we awoke to find bearish articles on the dollar in the London Telegraph, and in the headlines of The Drudge Report. The dollar was to become just like the pound after World War II, one London banker claimed. Is it possible he has a currency position? In the midst of her reelection campaign, Fraulein Merkel said that exchange rates would be discussed at the G20 meeting. The French are now complaining that the strong euro is hurting their recovery, and Alan Greenspan, trying to prove he is still relevant, said that excessive expansion of Treasury debt was a very bad thing. With this chorus of euro cheerleaders and dollar detractors, the euro recovered back to 148.02.
The US unemployment rate was reduced some from the previous report and considered constructive, but the home sales report threw the market a curve. Sales numbers at 2.7% lower than the previous period, not a big difference, but one the market did not welcome. The Dow is now trading about 60 lower and the euro sold off over 100 point from the high.
Failure to have another run at the highs today or tomorrow may prove a disappointment for the bulls. We picked up a long euro position at 1.47.35 risking 80 points, but fear the market may be loaded with longs. Unless equities continue their march to higher highs, an October break looms as a possibility.