Premarkets were up +0.4% and dropped into the red just at the opening. The ECB kept its rates the same and that accounted for the drop, however the averages all melted up into the green during the first several minutes and both the DOW and SP500 set new highs before showing signs of reversal.
By 10 am the averages were trending down after disappointed that there was no European-type QE coming. The DOW was down to flat status and dropping and volume was falling on investor frustrations and the markets may be heading further down than expected.
The ECB kept rate the same as expected, but the US Dollar pushed up to new highs as the Euro made a significant decline. The main message, promises Draghi, is that ECB assets are ready to expand as others contract.
European Central Bank preparing to use more stimulus if needed; stocks rally, euro drops
FRANKFURT, Germany (AP) – European Central Bank head Mario Draghi opened the door for further stimulus on Thursday, saying the bank is preparing the technical groundwork for new support measures that it can deploy if needed. Stocks rallied and the euro slumped on the news.
The ECB did not announce any new monetary support after its governing council meeting Thursday, at which it left its key interest rate at a record low of 0.05 percent.
But Draghi’s comments on the preparations for more measures jolted markets. The euro fell to $1.2394 from $1.2520 before Draghi started speaking. It is the first time it has traded below $1.24 since August 2012, when Draghi famously promised to do “Whatever it takes” to save the euro.
Central bank stimulus measures can weigh on a currency. In stock markets, Germany’s DAX index jumped 1.4 percent.
MarketWatch.com said, “Most analysts expect few fireworks.There are too many political obstacles right now for the ECB to push ahead with a full-blown quantitative easing program, though many economists seem to expect Draghi will continue to drop hints in that direction despite signs of discord.”
Our medium term indicators are leaning towards sell portfolio of non-performers at the opening and the short-term market direction meter is bearish. We remain mostly, at best, negative and conservatively bullish, neutral in other words. Right now now I am getting very concerned any downtrend could get more aggressive in the short-term and volatility may also promote a sudden reversal from where the market is now. The SP500 MACD has turned up, but remains above zero at 19.34. I would advise caution in taking any position during this uncertain period and I hope you have returned your ‘dogs’ to the pound.
