Yesterday was a significant day in the markets. For the first time in I don't know how long, we got a big selloff in the bond market along with a big selloff in the stock market. This happened quite often in 2015, as Bunds led the weakness in the fixed income space.
We had Draghi talking about not worrying about deflation anymore, and talking about the current economy reflating. Well, it seems like he didn't like the reaction in the bond market, because the ECB has retracted his statements to state that his outlook wasn't hawkish, but more neutral.
These central bankers are such micro managers, they have turned into daytraders. They are watching every tick out there. It makes me believe that the market has it right this time, ignoring the Fed dot plots which say 4 more hikes by end of 2018. They know that the central bank put is at a high strike price. Despite what they say about an inflated market, or worries about financial stability, they have the market's back. They built this monster. They're going to try their hardest to keep Humpty Dumpty together.
It seems we've finally gotten to a point where bonds have gone too far given current economic conditions. Stocks will have to take a break going higher now that we've reached resistance in bonds. A rally back towards 2450 will be a shorting opportunity. I am guessing that we'll get one soon.
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