Central Banks Goof (Again)

SPX landed right where we expected yesterday, the bottom of a sharply rising channel that — were it to continue — would levitate the index to 2500 by next week.  That, of course, was before things got crazy in the currency markets.

I’ve been pretty adamant that EURUSD overshot in its recent push past our 114.70 target.  I still don’t buy the idea of the ECB tightening any time soon.  The most recent ECB minutes appear to confirm this viewpoint.

The appreciation of the euro to date could be seen in part as reflecting changes in relative fundamentals in the euro area vis-a-vis the rest of the world” but “concerns were expressed about the risk of the exchange rate overshooting in the future.”

The EURUSD sold off further on this and other choice comments……with the net result being another breakdown for ES.

Fortunately for equities, CL reached our downside target this morning and stands ready to prop stocks up — at least in the short run — with a nice bounce of its SMA50 at 46.46.  But, with both EURUSD and USDJPY tumbling, will it be enough?

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