CPI Hints Of Lingering Deflation, Not Inflation
The market is lower again in early trading. Asian markets were lower overnight, and European markets are lower this morning. The Euro is actually getting a bounce today, but so far it is not helping to put a bid under stocks.
One of the things that is a bit worrisome to me is that the market is very oversold, yet it can put together a bounce. The chart below is from my colleague Helene Meisler, and shows how the 10-day moving average of upside-to-downside volume on the Nasdaq is the most oversold its been since 2008. Unfortunately, in 2008 the market bounced, but then went considerably lower. I'm not predicting the same outcome, but the similarity is worth noting.
The next chart shows the relentless decline in the Euro. Yesterday, Germany made some silly comments about banning short selling of its banks. I don't think they figured that if big institutions worried that they couldn't hedge themselves in financials, then they would just short more Euros. This has to be a crowded trade, and I'm wondering when we will see a short-covering rally. If you squint, you can see the small bounce so far today.