After a sharp rally (bear market or bottom, depending on the coolur of your spectacles), and a “kitchen sink” policy response from the Fed, we now get to test the resolve of the bulls. The uptrend line of the bounce has been breached, and it will now be down to the true believers to show an appetite to buy stocks “on sale.”
Or was the rally just a bit of short-covering? Certainly Macro Man knows a few punters who are/were short, and the chart of the HFR macro hedge fund index would appear to suggest that the industry was damaged by the rally. As is always the case, stocks rallied just enough to encourage any chart-reader to get out, particularly in the context of such a shock and awe responsde from the Fed.
Sod’s law would suggest that the decks are now clear for a renewed downdraft. Macro Man has sold a derisory amount of Spoos, just to have his little toenail in the water, but is fully prepared to engage more fully if the dip-buyers go AWOL.
The dollar trade, however, still appears to have some steam in it, with system funds in particular showing a solid appetite to kick George Washington in the groin. Hell, even USD/CNY forwards have come in, trading at the year’s low. Of course, they still price in a tiny CNY depreciation from current levels. The joys of beggar-thy-neighbour….