I don't trust last night's rally in US stock markets.

Sure everyone in equity land was happy that Shanghai scrapped its way back from nearly 6% down to close to square on the back of PBOC hopes but if markets last week sold off on the basisthat the taper is coming and that Central Banks want to takeairout of the bubble and if markets are worried about the state of the economy bring forward that taper then last night was nightto be concerned not to have rallied.

Just look at the data - it fairly screamed taper and the Stock market reaction fairly screamed"cognitive dissonance".

On the face of it none of the data were spectacularlyimportant but taken together they give a very good feel for what is happening in the economy right here and now. Durable goods jumped 3.6% against 3% expected. Richmond fedManufacturingfollowed its recent Dallas counterpart by jumping sharply to +8 from -2 last month. Case Shiller said house prices are up 12.1% year on year against expectations of10.6% while New Home Sales were 2.1% and Consumer Confidence jumped from 75.1in May to 81.4 this month which is the best print since January 2008 before his whole mess really kicked off.

So you can see in this that Bernanke and the team will be smiling to themselves that they are doing the right thing and the market rally last night might prove ephemeral in the days and weeks ahead as thoughts and talk of the taper grows. And for goodness sake there are 5, yes 5, Fed Governors talking in public in some way, shape or form tonight.

In the end though the Dow was up 100 points to 14760, the Nasdaq rose 0.82% to 3348 and the S&P 500 rose to 1588 up 0.95%. In Europe stocks were also higher with the FTSE up 1.21%, the DAX up 1.54%, the CAC up 1.51%, stocks in Madrid up 0.73% while in Milan the Bourse was 0.37% lower.

So while US equitiesgooosedthemselves higher, those drugs would be illegal in New South Wales, the positivity in the data for the economy was not lost on the US bond marketwhere 10 year Treasuries rose again to2.61% this time and it is increasingly looking like these are going to need to travel to somewhere closer to 3% before any meaningful support can be found.

s&p 500, spx, s&p 500 chart, daily

So I don't trust lastnight'srally and although I'm not silly enough to say the market is wrong and I am right my JimmyR indicator says it is now a bear market so this looks to me to be a reactionoffa very important long term Fibonacci level and that's about all.

In FX land it was a bit weird with the Euro, Yen and GBP under a bit of USD pressure but it wasn't exactly super strong and the Aussie had a wild ride, again I might add.

TheEuro looks really weak to me and I continue to see it trading substantially lower in the days and weeks ahead. Over the past 24 hours the range has been 1.3150 down to 1.3063 and it sits at 1.3092 at the moment.Eurolost ground across the boardslightlyas well due to this weakness in the Euro outright. It is sitting just on the 200 day moving average at the moment and a break, and hold, will likely turn the trend back to negative.

eur, eurusd, euro, euro (eur) price quote

USDJPY was a little higher trading up to 98.05 and GBP sits at 1.5425. The data in the US last night combined with 5 Fed speakers, in some form or the other tonight, should aid the US dollar across the board in the next 24 hours if the Bernanke, Kocherlakota,Fisher lead in over the past few days is any guide.

TheAussie has looked both very weak and very strong in equal measure at times over the past 24 hours. Opening around the 0.9250regionAussie traded down to 0.9195 and all the way back to 0.9296 and sits up just 0.10% at0.9256. At least Nicholas Darvas would be pleased because we know we are in a0.9190-0.9300 box for the moment with an extension up 0.9325 and down to the low the other day of 0.9145. Abreak will likely kick one way or the other.

Morning Report - who to trust stocks or bonds? I'll take bonds

Clearly after all the downside recently and given the set up a break the topside is likely more decisive.

Now one thing I should do,because I have begun a conversation about my trading in this space is highlight the lessons learned yesterday - or should I say relearned. So memo to self- DO NOT TRADE WHEN YOU ARE SICK. I have spent a lot of time overthe past couple of weeks collectingpipsand building up a substantial return amongst all of the volatility. But in one fell swoop yesterday I managed to screw it up because I wasn't paying attention and didn't stick to my process - largely because I'mcrookand should have turned to machine off.

So it wasn't a banner day, the volatility that I love bit me on the backside and I got the relearn 2 lessons,don't trade unless you are fit to trade and don't deviate from your process.Stuff happens and we move on but gee whiz!

Crude was largely unchanged up 0.15%,with gold and silver a similar amount either side ofsquarefor th epast 24 hours.

Data

Gfk Consumer Confidence in Germany, GDP in France, UK Financial Stability report but we know the banks need to berecapitalisedfrom this week so should have limited impact I guess and then the thirdread I think of US GDP.

AND 5, yes 5, Fed officials speaking in various contexts.

Twitter:Greg McKenna

Source http://www.fxstreet.com/fundamental/market-view/australian-dollar-a-look-at-main-drivers/2013-06-25.html



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