Choose your Poison

 Haven't we had one of these before? FOMC doesn't hint at QE3 so we trash everything as there will be no more free money? But no more free money because free money is not needed is not a reason to sell everything. Bonds - Ok that makes sense,  but equities? We are pretty sure that QE3 WOULD be back if needed but if you are beating up the QE trade then you buy usds, sell bonds and sell gold. But do you REALLY trash equities? US markets closed pretty stable and it had only been Asia pushing things lower but now Europe is trying its best to have a wobble "all by its own self " as if the FOMC wasn't enough, with the reason morphing into a Spanish event.

But what of this Spanish event. Is it real? Not yet in our eyes. Or is it just the soft underbelly of Europe to be next jabbed at by the Bond Vigilantes? Perhaps. Or is it just the cat that is being kicked, the kicker having been irked by lack of performance in short US and China growth trades? Perhaps.

But we do feel that leverage and short term specs are desperate for risk to sell off for a multitude of reasons and the scepticism that was present at the beginning of the year is still with us. The key point we believe most important to those players with strong hands (real money) is that the growth backdrop is good and improving in 2 out of 3 of the world's growth engines. The arguments for risk to sell off seem centred around theses that are either plain wrong in our eyes (china hard landing), or are not yet systemic - take your pick from the list of Eurowoes that the current Spain move is exemplifying and are as yet unproven (April/may seasonal data rollover). We also hear arguments that the rally has gone on "too long" (SPX did 55pc off its lows in 2009 with no more than a 7pc correction) and hear those arguing that one stock cannot make a market (AAPL). The trouble with this view is that for every potential risk that bears come up with, we can come up with a positive. So our "Big picture" remains that this still looks like a Wall of Worry. Add to that, positions are still not large in the medium term space i.e. real money and  long/short equity hedge funds look as though they are running only 35pc net long vs 60-65pc in every 5%+ correction we have had since 2009.

Our shorter term worry is that prices are today getting smaller and charts are being waved showing important lines. And we know from experience that lines on charts are the troll bridges of markets under which hide large ugly stops that will gobble up little bulls no matter how cheery their long term views.