Traders Talk About Three Things

Equities start the day lower as the ECB punts on 2nd down. Actually they probably punted on 3rd down given the fact they drag their feet every play. Let me set the scene for you on today’s ECB event:  On one side of the table you probably had a group of Europeans saying “we need some QE up in this” and on the other side off the table you had a group saying “nein”. So yea, the ECB decided not to engage in further stimulus (for now) and futures dropped. On the other side of the world you have Japan throwing QE around like confetti and Chinese stocks absolutely roaring. Have you seen the 5 day move in Shanghai?  What is up over there? Did they invent a new kind of Kung Pao because Anton likes his chicken spicy. Actually it’s just speculation that China has bottomed and the rally has more to run but we’ll take it! Back in the States there wasn’t much news overnight so we spent the morning pondering foreign stock markets and whether Christmas trees should have white or multicolor lights. Such a tough decision…feels like multi color is the wrong answer though. I don’t know, I guess I could be swayed by the “when I was a kid all we had was multi color so it’s nostalgic” argument. Oh well, let’s move on.

After the open we sold off because the ECB didn’t give us more cowbell. Then, 2 hrs into the day, Bloomberg ran a headline saying “ECB Said to Prepare Broad-Based QE Package for January Meeting” and we ripped! So sell them on the ECB dragging their feet, then buy them on a random headline! Can you imagine trying to be bearish right now? Your thesis might have been “those Euros are going to do nothing today so I’m selling stocks” and you would’ve been spot on!  For all of 2 hours!! I mean let’s face it, the ECB is ready to do something big, the pump is primed. They just need to catch the Germans looking the wrong way. Hey Weidmann, look over there! *buy me 2 trillion BTPs stat!* Anyway, rumour markets will rumour and by lunch we sat on 2,073, flat on the day, a full 10 pts higher than we were when Europe closed. Winners were AVGO, DAL, KR, MNK, and LYB. Losers ESV, WYNN, RRC, NFX, and DO. No rhyme or reason to that winners / losers page. Outside of random macro headlines there wasn’t much going on. I mean there’s only 18 trading days left, interest is waning by the minute (as are Tiger Woods’ golf skills).

The final hour saw a brief dip as everyone realized random headlines aren’t enough to sustain a rally, but by the time we closed we were right back to lunchtime prices, 2,071 down very slightly. Look it’s patently clear the market expects some kind of additional European QE. While over at the ECB their plan appears to be “tread water hoping things improve”. Usually markets get what they want so if I had to be pinned down to a position I’d take the market’s side in this fight. Well, tomorrow is the last jobs report of 2014, a year in which the US economy added about 2.2 million jobs. That’s good right? Setting the stupidity of politics aside isn’t 200k a jobs a month a good thing? I’ll take it and a 10% SPX return. The US Economy remains resilient in a sea of mediocrity; let’s hope that continues in 2015. 

Final Score:  Dow -7bps, S&P500 -12bps, Nasdaq -2bps, Rus2k -51bps.  

News Highlights: 

So I’ve been teaching my kids how to ski.  It’s fun, at times.  Other times its sheer terror, but I’ve failed to capture that terror on video.  Luckily this guy didn’t fail us!!  (I swear I’ve had this very same conversation.  I feel like an idiot yelling pizza at the top of my lungs).

Have a good night