Pre-market thoughts

As I write this, the market is taking it on the chin with the futures down over 1.5%. I think the reaction across the globe today was two fold.

1) I think there was a little disappointment that the Fed didn't come out and do more. After all it's what it is basically doing is keeping the size of its balance sheet at these levels instead of allowing it to shrink slowly. The market was probably expecting more QE and a further expansion of the balance sheet.

2) The economic data that came out of Japan and China was worse than expected signalling a slowdown in those two economies.

Combine those two points and you could say that the Fed is behind the curve?? It remains to be seen whether this sell off develops into something more nasty but I suspect buyers will come back in a lower levels just because you've got nowhere else to put your money ie property still stinks & bank deposits are paying nothing these days because of the record low yields. Therefore even though you know the global economy ain't going that well, and all three choices are bad, its like choosing the not so bad option.

We'll see in the first hour just how bad things are, when we get to look at the internals underneath today's price action. If the institutions really didn't like what they are seeing from those two points above then you would expect extremely heavy volume and very lopsided breadth and tick action (-100,000) at the end of today's trade.

My money is that there will be buyers and this is not the beginning of a new down leg. We need something a bit more dramatic than a few bad data points for the markets to totally reprice risk. What's more likely to happen is that we might trade between 1080 and 1120.