Stocks Are Quiet, But A Violent Storm Lurks Underneath The Hood: Here's What You Need To Know

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Don’t be fooled by the very quiet, range-bound action in the stock market today. That’s not where the fun was.But first, the scoreboard:

Dow: -18
S&P 500: +1

And now, the top stories:

  • Thanks to Japan we return to the “currency wars” theme. The Bank of Japan once again announced a new easing initiative with plans to buy ETFs, real estate, bonds, etc. But they didn’t accomplish anything. The dollar plunged against the yen, the Nikkei fell. And for the third day in four days, Shanghai fell as well.
  • European shares were mostly up, but not radically, and with little news.
  • Coming into the US morning the theme was dollar down, and everything else up. We’ve been seeing some breaks in correlations lately, with the dollar rising AND stocks rising, but that was not the case initially. Gold rallied all day, reversing a slump. Treasuries also rallied.
  • At 8:30 AM initial claims came in better than expected, but they really didn’t do too much to move the market.
  • As the day wore on, the dollar continued to get slammed, but equities didn’t really benefit much, which actually is a continuation of the divergence we’ve seen, where the “risk on” and “risk off” patterns are breaking down. 
  • Everyone is now firmly on this “quiet-before-the-storm” theme, with so many big events (FOMC, election) coming next week, and though on the surface things are quiet, the changing correlations signify something real brewing underneath the hood. We’ll find out soon how this all plays out.
  • Our favourite news of the day: China announced an easing on rare earth export restrictions on the very day a rare earth ETF hit the market. All the big names, MolyCorp, REE, etc. got whacked. Click here for a guide to who is who in the rare earth industry >

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