1. Regulator policy is very hard to predict and it may well send the markets into months of turmoil
2. Fear indicators are building up: volatility, dollar, gold, silver – they are all very high
3. With US QE over and European/Japanese easing the US market changes its orientation.
4. Strong dollar keeps carry trade elevated. The money did not become tight yet, and probably will not get tight this year…
U.S. stocks fell on Tuesday, after a near 300-point rally on the Dow evaporated amid falling commodity prices and worries Germany would throw cold water on the European Central Bank taking additional steps to bolster the region’s economy.
“We’ve gone from day-to-day volatility to intraday volatility,” Mark Luschini, chief market strategist at Janney Montgomery Scott, said.
“A progression of events caused this, in the context of a market that is scared anyway, with the VIX trading above 20,” Peter Boockvar, chief market analyst at the Lindsey Group, said of the market’s about face.
“Copper prices are falling out of bed, down 5 percent, that tells you something about global growth, that something is not right,” Boockvar added.
Reports from overseas that had Germany downplaying the notion of further quantitative easing by the ECB helped push the market lower, Art Hogan, chief market strategist at Wunderlich Securities, said.
“There are rumors that Germany is botching quantitative easing, and the market is looking for QE to come out on Jan. 22. It’s a non-trivial worry, when you’re talking about a eurozone that in the aggregate is almost the size of the U.S. economy,” Luschini said.
“And, there’s continuation of pressure from crude prices; investors are still trying to ascertain if lower energy prices are good or bad for stocks,” Hogan said.