16 Feb WAS FRIDAY A DEAD CAT BOUNCE?
Was Friday a “dead cat bounce?” I do not know but all had small sense of relief from the relentless selling pressure that has decimated the markets. The catalyst for the rebound was oil’s rebound from 12 year lows—the greatest advance in seven years–and financial stocks. Treasuries had their biggest drop of the year.
Commenting about January’s retail sales, I thought the statistics suggested the economy is not falling off the proverbial cliff. In fact one subset is consistent with three percent growth.
Late last week there were a chorus of “influential” icons commenting the markets are devoid of reality, that prices have fallen to dramatically against the current and expected economic backdrop. The economy is not about to enter the abyss as the narrative is suggesting.
Several have stated the markets are “devoid of rationality” that are “overly influenced by cross correlated trading strategies.” Bloomberg writes the Dow has now registered 29 consecutive sessions with intraday moves of more than 200 points. Wow!!
I hope these comments are the beginning of a crescendo that will begin to limit these “cross correlated trades” which according to the American Cattle Association is “distorting reality.”
What will happen this holiday shortened week? Earning season is coming to an end, a season where profits again generally surprised on the upside, the result of dumbed down expectations, but contracted for the fourth consecutive quarter.
The economic calendar is comprised of various inflation indices, housing and manufacturing statistics and weekly jobless claims.
Last night the foreign markets were up. London was up 0.57%, Paris up 0.50% and Frankfurt down 0.47%. China was up 3.07%, Japan up 0.20% and Hang Sang up 1.08%.
The Dow should open considerably higher as China opened strong following its closure in celebrations of its New Year. Oil is higher on reports that Saudi Arabia and Russia are to freeze oil near record levels, the first such coordination between OPEC and non OPEC countries in two countries in 15 years. The 10-year is off 9/32 to yield 1.78%.