What A Boring Day

For the second day in a row the indices did very little but the action under the surface was mildly positive. Breadth was pretty good and there were some bounces in oil, commodities and big-cap momentum names like GOOG, GS and AMZN.

After the selloff on Friday through Tuesday, we were oversold and due for some sort of relief bounce but all we've really done is run in place. The churning is using up the buying power of the dip-buyers and sets the stage for things to roll back over again. Buyers should be anxious to snap up some of these bargains after these sharp pullbacks, but they are hesitant and that increases the chances that they will stick with a bounce for long.

The dollar was largely weaker as sentiment reversed on Thursday, but the euro was still unable to move much above 1.40. Yen was also softer and underperformed the buck, so dollar/yen traded back to 93. EM currencies were largely firmer, but have yet to recoup their recent losses fully. Biggest gainers vs. USD on the day were PLN, HUF, GBP, SEK, and NOK, while only losers vs. USD were MXN, KRW, PKR, and JPY. US weekly initial claims fell sharply to 565k, but the data was distorted by seasonality. Continuing claims surged, however, pointing to a still-weak US labor market. FX markets still struggling to find next trend, so volatility to remain high as we close out the week. EM currencies are likely to remain under pressure near-term. The Fed balance sheet shrank to $12.8 billion to $1.99 trillion this latest week, while Fed UST custody holdings jumped $22 billion (the biggest rise since mid-May).