Fail

In last night’s post we commented on the spike in equity futures and lust for risk assets on the back of the Spanish bank bailout,

Mr. Risk and the S&P’s have gapped up through resistance in overnight trading on the Spanish bank bailout.  It will be interesting to see how it holds up at the open.

This bounce is going to be THE test for the market as to how it trades the rest of the  summer, in our opinion.  The news flow over the past week has been positive and it has caught many offside.

The market answered and traded straight down from the opening bell giving us one of the worst reversals we’ve seen in some time.    Though our sell bias has more conviction after today’s trading our sense it’s not going to be so easy as just putting on a massive short here and making the year.  Not enough real money in the market and when the noise traders all lean on the same side of the ship we know what happens.

Nevertheless, debt financed bailouts, talk of capital controls, subordinating creditors,  and ambiguity in funding are not going to calm the herd of capital flying out southern Europe.    Now what?

And then there is China.

(click here if charts are not observable)