Funding stresses in Europe have eased in recent days for peripheral countries. The Spanish two year yield is trading at a little over 3%, down from 6% not long ago. This is a big positive but the danger is that we have seen this before only to see stresses return when the ECB backs off. That is the reason that I took profits on my long trade from yesterday.
I remain at a medium sized net long position despite the sales I made this morning. I believe sentiment is a net positive for the market as hope at the beginning of the week has morphed into skepticism. Large investors are under invested, we are no longer overbought, valuations are reasonable and seasonality is positive. Europe is a big risk. EU leaders are whistling past the graveyard but stop short of allowing us fall into the abyss.