Tuesday, June 25, 2013

Rebound, Wash, Repeat

Well, the markets seemed to have dodged the proverbial bullet overnight again.  The ugly close of the US market yesterday spilled over into Asian markets last night and in particular China.  After a weak open, the slide gathered steam and the Shanghai index was quickly down 10% in the last 2 days.

However, a rumor of more liquidity coming from China's central bank pulled the market back sharply when the computers decided a rumor is better than nothing.  This carried over to Europe and the US where markets are now solidly green.  The problem is that about an hour after the rumor emerged, the Chinese Central Bank and said liquidity is ample, thus there is no need for added liquidity.  Thus, the rumor was denied, but the market reaction had taken on a life of it's own at this point.

This is very reminiscent of the EU rumors from 2010, 2011, and 2012.  We'll see how it plays out this time, but the markets are feeling very shaky right now.  The end of this week should cause some interesting last minute trading fireworks.

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