A few quick things:
The JPYUSD touched 76.12 this morning (new substantive low), and is trading at ~76.3 at the moment. It had a strong jump off the 76.12 level in the 1min charts, but quickly resumed its downwards trend.
The Dow rose but failed to close – or even trade – above 11 540 again!
The Euro is, given this, trading at… slightly below US$1.372 and creating a flat triangle top??
Gold is back above US$1800/oz!
The EURSEK broke the 4h chart bottom tripple bottom of 9.10 last night and is trading at 9.06 at the moment.
So, risk assets were up, safe assets were up, but rallies in everything but the yen and SEK mentioned could not be sustained. I have spent some cosiderable effort trying to make sense of this.
Part of the reason is “productive”. That is the one word that sent markets up following greek negotiations with its bondholders. The word used was not “favourable” or “substantive”, it was “productive”. Productive can be the bondholders going “we agree on the problems, and we’ll try to figure out some way to provide assistance so that Greece can have a snowball’s chance in this hell of making it.” It could also be Greece going “Here’s our situation, we’re gonna default, but if we do it later you may save Italy and Spain. Your call; we know misery and frankly think you should have some too, but rub our backs for a little longer and pray your banks and sovereigns get sorted out. Proceed to sign here.” Or even “Greece, you’re insolvent, if you don’t default now, we won’t kick you out of the euro and may even provide some more agricultural support, import your stuff and cash a few bailouts. If you do, expect blockades forever. Now tell the markets everything is fine.” Besides, if you believe any of this “productive” hype, why did nothing work after July 21’st, when the last bailout package was agreed to?
Another part of the reason is the “things are so bad they are good” argument, with people thinking the Fed has to support asset prices somehow, or at least conduct Operation Twist fully. 1: Chance of Twist working? Low… Again, the Fed has no mandate to support stock/asset prices, and if this is part of your speculation, why on earth do you allow the arb-traders to frontrun you by trading off it the day before the meeting instead of the very day the bad news comes out? I guess this explains gold, equities, and yen. Everything goes up becuase the expectation is that the Fed will use ever more worthless dollars to price everything… And the problem has always been lack of clarity and information from the Fed when it has vowed to use language as its tool, why would any further comments help substantially?
Finally, the IMF was pretty grim to everyone except Japan. But that was for a lessening of the shrinkage of the economy from 0.7% to 0.5%. Probably in local currency, but still. No wonder markets were chaotic yesterday.