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Daily Close

Afrer squeezing some 3% on a relief rally on Tuesday, stocks gyrated on Wednesday with the path made more uncertain by a poor US 10 year auction which despite news of a budget agreement sent yields back up to levels that roiled equity investors sentiment last week. Oil also dropped 2% as US oil production passed the 10mn annual bd threshold, overtaking Saudi Arabia’s production and fueling fears of oversupply. The dollar rallied 1% after ECB Nowotny accused the US of manipulating the dollar lower . We are not sure if US authorities manipulate the dollar but they are obviously happy to see it go down... With a  large and growing twin deficit to finance, the gradual erosion of the petrodollar that has permitted  until now a cheap foreign financing of US profligate ways, makes the path of least resistance  for the dollar, down in any case. Talking about the dollar recovery under way, the odd thing with yesterday’s music and the early S&P further squeeze is that it materialized despite a solid correction in China overnight and with European stocks not really responding to solid dollar strength yesterday. This suggested that the “odd man out” was perhaps the S&P levitation and not everything that happened around it yesterday. A market running on empty is susceptible to stalling at any time and that is what the S&P did in the last minutes of trading yesterday.

Still the same story.. cross asset correlariin is to high for diversification to help out, hence tge continued auffering of risk parity traders. CTA’s are not faring much better.

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