Market Alert - Pre-Market

Futures vs FV: SP -7.76; DJ -78.14; NASDAQ -22.61

Futures have roughly doubled their pre-ECB downside from modestly lower to significantly lower and still trying to find the bottom.

You can parse all of the other data, but the market was basically flat until the ECB and Draghi announcements. This is why you have to hate trading in the midst of hyper-meddling central banks.

ECB is keeping the $1B/mo bond buying program in place. That is not the issue. It is the comments regarding the potential changes in the program that are driving markets. Lower.

First, the ECB did not extend the program but kept the current deadline.

Second, he would not directly answer a direct question on whether the ECB would buy stocks. Instead, Draghi said the program was 'effective.'

Third, he said they were 'studying' possible changes but did not discuss increasing asset buys.

All in all the markets hated this. Markets are addicted to more and more stimulus and the audacity of a head central banker to say that they did not discuss specific expansion possibilities is more than they can apparently bear as futures flopped, the euro jumped, and US bonds sold.


Japan GDP revision: 0.2% vs 0.0%. Even with the improvement Japan is talking even farther negative rates in desperate hope to get inflation up to 2%. Hint: not going to work.


China: Imports +1.5% yr/yr vs -4.9% exp vs -12.5% prior
Exports: -2.8% vs -4.0% exp vs -4.4% prior

OIL: API reported -12.0M bbl draw versus +0.94M bbl last week.
Gasoline: -2.4M bbl vs -1.6M bbl last week

Earnings: PIR, HPE reduced guidance.


OTHER MARKETS
Bonds: 1.572% versus 1.53% 10 year

EUR/USD: 1.1313 vs 1.1239

USD/JPY: 101.70 vs 101.759

Oil: 46.24, +0.74

Gold: 1347.60, -1.60


Futures are trying to find a bottom at the Wednesday midday low on the SPY. So US stocks are testing that level from where they recovered from yesterday. Not an auspicious start but holding a logical level to try and make a stand.

We will have to see how this plays out. Market disappointment at not getting even more stimulus is a tough one. Cramer says Europe is getting better (again, for the 4th or 5th time over the past 3 years) so logically, why would more stimulus be needed? Well, logic often does not matter in markets (emotions control near term) and perhaps Europe is just not that solid. Sure many world economies are no longer on the brink, but they are not rallying, just in a lateral malaise. Could central bankers be questioning the efficacy of their actions? The former Dallas Fed president was on CNBC this morning and said the Fed found out that its QE just was not that effective in aiding job creation. Perhaps, but those still in power will never admit it.

That leaves us watching how stocks hold through this support as it absorbs this latest round of central bank news. If the markets could handle the Fed and its recent muddle, it can handle the ECB though the latter is still fully in the stimulus game while the US is pretending it is not.




Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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