Morning Brief Thursday August 2, 2012

Good Morning. One central bank meeting down, one more to go. Thursday pre-market, Mario Draghi and the ECB will meet and the markets will see if they can “walk the talk.” Though Draghi said he would do all he could “within the ECB mandate” markets opted to ignore the “within the mandate” component and rather interpret his words as a blank check (pun somewhat intended). And since the Bundesbank came out and made it clear what Draghi could, more so could not do, then it could be an interesting meeting.

What is also going to be interesting is how markets handle macro data in the coming days, especially Friday’s non-farm payroll. Is bad now bad or is bad still good? Is less bad good? Is really good bad? Sounds like I’m just wasting time writing nonsense but honestly those are the thoughts that go through this central bank inspired equity market.

One group that is likely siding with all other asset classes are small caps. The late day selloff on Wednesday was impressive as the RUT was 170bp (1.7%) weaker than the SPX and continues to lead markets lower. I was impressed how it closed below the price component to trigger short. But what has me still a bit cautious,

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