As they say on the financial infomercial channels, "US equities appear to be out of favor today."
There are rumours swirling the trading desks that a large US bank is in trouble, and will need some help getting itself re-organized.
The name Wells Fargo has been mentioned, and there is an associated six percent drop in the stock, with a groundswell of put option activity. It does seem like a 'setup' to us. There are also rumours that Cerberus is in trouble (and there is plenty of smoke on that one.)
There is a contrary view that this is a 'setup' to suck in the shorts and help to trigger a massive rally when the Jobs numbers are reported on Friday.
There is a flight to safety into the dollar and treasuries, but interestingly enough also gold and silver, as 'investors' exit US stocks.
So far we are holding a key support level around 995 on the SP futures, and we tend to discount most rumours that make it to bubblevision rather heavily. If there is any real news it should come out in the evening.
Let's see what happens. We're hedged to the short side which is where we have been coming into the day, anticipating a pullback to key support. We're there now.
There was 'good news' today, and the market ignored it and went sharply lower. That may be significant but it is too soon to tell for sure. A breakdown in equities from here would be more significant to our minds.
In sum, this is a highly manipulated market, full of speculation and hot money. The Obama Administration is failing badly to reform the US financial system, and so here we are, trading on hot money and rumours.
