Yesterdays rally was quite a big and aggressive one. Before the US market open, all European indices were well under water and the S&P futures were down 6 points, before we ended up 18 points, a 24 point turnaround. Now is this a part of a turnaround, or a breather for the bulls before we continue downwards. Well one notable fact was that the volume was still light.
Another thing is the disconnect between bonds and stocks still exists, as we were racing to new highs in stocks Bonds were trading at highs too.
Bunds are trading at 120.57 now as we continue to go higher aproaching our 121.50 target. We have rallied 300 points off the low reached at the begining of june and more is expected before we pull back.
Its the same story for the Euribor spreads as they continue higher as does short sterling spreads. It is hard to determine how high these may go, but while they continue there pursuit upwards its best to trade it with caution.
Looking ahead its a quite day on the news front, with Michigan confidence at 3 pm GMT the main piece of news.
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