Monetary policy groveling became a full-blown skirmish between Germany and the EU; while on the sidelines China has resumed 'competitive devaluation' in a 'stealth' manner; taking the Yuan to new nearly year-and-a-half lows. That's patently contrary to the idea of FX stabilization; and so far has impacted the Yen and Euro more so than the Dollar. What they are doing in Beijing contradicts the understanding of G20; and brings-out shills calling for IMF to be easy on China.
The breadth of investment opportunity is rising as these problems unfold; but is going to make stocks in Asia and Europe attractive, only if downside resumes to a logical conclusion. In a sense that's exactly what institutions and central banks are trying to prevent; ironically increasing the 'risk threshold' in the process.
That's clearly saying that it's not a safe time to jump in (it's not in Asia or here in the U.S.). However it is worth watching going forward, given higher proportional cash balances we've contended appropriate to build on rallies over the past year (not just short-term), and the realization that the next serious 'investment move' will be to buy not sell; while anyone who hasn't lightened-up probably should on this move; which is dangerous and related to an unconfirmed oil story.
Lightening-up is a presumption for investors not yet concurring with us building capital over more than a year, but given the market has been so rangebound for historically such a long-time, it suggests a significant distribution still has many funds seriously exposed when, not if, this market breaks to significantly lower levels. Today was mostly a major short-squeeze on the Oil rumor; which can be a sell the news event; should we get anything favorable from Doha on Sunday.
Technically, what happened today was seemingly a 'manufactured' necessary lift from a precipice we all are aware of (lateral lows of recent days); so coincidental or not, the Oil story hit minutes after we called for a rebound anyway (given the failure of yet-another opening rally, and the ensuing sharp drop threatening even to bust into the 2020's of June S&P, which was diverted by the Interfax story that didn't attribute credible sources, though we'd welcome it to be a realistic report).
Bottom-line: there is no affirmation that the Saudi's and Russians agreed on a freeze. There may be nothing; especially since nobody knows of a deal with Iran or other OPEC members. So it's all speculation; place your bets and see what is seen Monday. Buy the rumor; sell the non-news before the meeting; or sell news if indeed something comes out of it.
Insane on the surface (impossible dilemma other than some speculative position out there); since the market is overbought again immediately. Plus just because (and I hope we do) see Oil back in the 50's has everything to do with control of production if it occurs, and nothing to do with 'demand' as some foolish pundits see it. In fact domestically there was another large inventory build late today.
In sum: instead of trying to sort out what does or doesn't happen in Doha (might as well not view a non-deal as any more significant that previous oil rumors that relate to production freeze or cuts); why not focus on another IMF global growth downgrade, which tells a better story of how poorly economies are doing now; it might be notable to point out: 'with' cheap fuel. So if fuel prices rise how is that a bullish sign for economic recovery? It's not; but the markets temporarily like it.
For the most part this was a short-squeeze; and that remains the risk because it is well known now about the disconnect between equity prices and economic or earnings realities; really globally. The world is not really doing much better; and I think too many are drawing incorrectly or excessively optimistic conclusions just because another oil rumor hits, and prices lift off a last-ditch short-term support.
Let me poise this differently: if there were no oil rumor and the S&P finished 20 or 30 handles lower than it is today; would that mean global economies are any weaker? Of course not. This was a moment they needed to step-in (and glad to have suggested a rebound minutes earlier); and they did. Remember even that double-bottom back in February was 'cleverly timed' with an oil-rumor story. That one to this day was never confirmed either. Treacherous for trading; but nothing of substance has changed; not yet anyway.
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