The perennial yield-chasing beyond equities is contributing to the top overvalued market in the world; as that goes beyond corporates and to sovereign government(s) paper. Perhaps that's why the BoE focused on their (questionable mandate to even do it) bond buying program in the manner presented. More than a third of sovereign debt (globally) is yielding around zero or even less! Given how it's been bloated by so many; imagine merely the debt-service-costs 'when' (not if) rates eventually increase.

It's not even a question of balanced deficits or reducing debt. Those are pie-in-the-sky political dreams for now. And the central banks that have done this not only painted a corner for themselves to remain stuck in; but risk creating a very disaster they sought to avoid, by virtue of letting this unmitigated monetary lunacy persist for so long. Now they are scared. They bring out Bill Dudley (NY Fed) last week; and Stan Fischer on the weekend (Fed Vice Chair) and talk about normalization and better jobs levels (of course they won't mention that the biggest increases are in the elderly having to work beyond retirement ages, which some enjoy but that doesn't speak to everyone). Well, if they believe things are getting better; are they just talking, or preparing markets for a extremely overdue move by the Fed; after counterproductive low rates for too long; and now counterproductive rate hikes if they do it; because of the possible havoc.

 If this were rapid growth for revenue and earnings (a pet argument that doesn't hold water in enough industries) then sure, money flows from debt into equities when the tide changes. But this has become such a bubble, in both equity and credit, that (and there is no historical precedent) nobody knows what will happen. Perhaps the Fed knows this, which is why they keeping kicking rate balls down the road. Are they afraid of pricking the very bubble they created?  

That's phenomenal; and sure has made many otherwise intellectually-correct analysts seeing the situation, appear to be overly cautious and not getting the pending risks. At the same time equity spin-meisters try to convince investors that technology stocks at this point are the way to go. Of course they'll say that; they can't get much more out of housing; auto-sales are starting to feel pressures from lower demand (not to mention junk subprime auto loans which are revealing some change); financials refuse to take up the leadership mantra; and mostly this market is swinging on Oil's every move.

And Oil may digest this pullback and regroup. Yes we thought it would set-back (didn't want it to, but realistically); but now there's pressure on Canada to restrict Alberta's shale exploration (or limit it severely), which is a big fight given how it represents from an overall view, about 20% of Canada's total GDP (mostly Alberta as a whole). You're just starting to see pressures linking (or trying to make the case they can't fully prove) the surging wildfires in the West (and Canada) with the burning of fossil fuels; so that fuels the case for 'climate change' pressures on petroleum in general. Much may be a 'smoke & mirrors' situation, but what we do know for the market is that Oil is the game at the moment, and accounted for the volatile swings we had in Monday's market. It's a good example of the market's fragile condition beyond traders Fed dependency. 

But beyond Oil and mixed leadership (really moribund ahead of Jackson Hole later in the week), there is a high probability of loss from the chasing of yield going on, and it has the potential to roil markets in ways not seen at all by the present Generation, in a particular set-up. Danger.

In sum: an overall narrow daily-basis change belies the internal oil-fueled volatility. At the same time global geopolitical tensions are unabated and actually worsening. Yes it is a Summer doldrums if you only look at it daily; but it's showing illiquidity signs for any glance at the internals. We actually scalped the pattern fine on Monday morning; and hold the overall short from 2190 Sept. S&P, for almost a week now. It's all on-hold pending Jackson Hole; and even if the market gets through that with some relief (sure there's no assurance of that), all it does is set-up yet another potential accident.