Punxsutawney Phil

Just when it looked like Punxsutawney Phil was about to forecast another day in the blue for equity markets, out comes the ISM. In quite a turn up for the books, a bad number has not been spun into a good one by the market. Well not yet anyway. Only a handful of hours after being published, the Hitchhiker’s Guide to the Market may be consigned to the dustbin of history. But let’s hold off for the time being on such rash statements, we’ve been here before only to witness a miraculous 180 turn.

Looking at the ISM and it wasn’t good. With the exception of supplier deliveries and inventory change, everything was down on the June number. And weren't we hoping for inventory drawdowns to kickstart GDP growth in H2? In particular, the prices paid took a particular fall, coming in at 41.3 vs 53.7 previously. Perhaps exhibiting prescience ahead of the NFPs on Friday, the employment component fell too. All of this has conspired to send the erstwhile parabolic (new buzzword du jour) market lower and asks the question of whether all this has been one big sugar high (another new buzzword. Still, at least green shoots seems to have disappeared from the market vernacular).

Speaking of parabolic trajectories, I saw a chart yesterday showing how the S&P was testing the recent uptrend range. It was about 8 points off its highs at the time! It seems crazy but it does show how quickly we have risen over the last few weeks.
We have now broken that line for whatever that is worth.

For the Risk Off we’ve seen in equities since the ISM, it has only really followed through in bonds. Ok oil is off but there was a big build in crude. DXY, while up is far from rallying hard and commodity currencies have only given a little back of their recent gains. China is going to maintain moderately loose monetary policy the PBOC reaffirmed again today, just in case you didn’t catch it last week and there is talk of Australia being the first to look at raising rates. Nothing new but it seems to be stemming a puke in the resource sector.

We’ll have to wait and see if this is another market headfake or is Groundhogday finally coming to an end? If the latter, wintry days in the market lie ahead.