Market Outlook: Current Scenario Is Similar To The 'Flash Crash'

As the economic calendar slowly picks up following the NFP lull, we are looking at a busy week both globally and in the US, where an army of Fed speakers culminates with a Yellen speech on Friday at 1pm in Rhode Island. As DB notes, the start to the week is rather quiet with just May NAHB housing market index in the US.

Some weeks feature a contrast between past and future — a possible inflection point. Here are the current elements:

This post ‘Red’ Is The New ‘Black’ In Saudi Arabia appeared first on Daily Reckoning. What a weekend! Thanksgiving, huh? Could’ve fooled me. On Friday — “Black Friday” for shoppers — oil prices fell to four year-lows, unseen since the post-crash recovery days of 2010. Meanwhile, in trading pits across the globe, panic prevailed and red ink (or “blood,” if the analogy suits you) flowed. For oil, it seems, red is the new black.

Last Friday, when the market was down only 2%, we presented our readers with a note which promptly became the most read piece across Wall Street trading desks, which was written by JPM's head quant Marko Kolanovic, who correctly calculated the option gamma hedging imbalance into the close, and just as correctly predicted the closing dump on Friday which according to many catalyzed Monday's "limit down" open.

By Price Headley, CFA:The bulls appear to be in charge, judging from Friday's bullish kick... bullishness that formed despite a lethargic week and despite the fact that stocks are still overbought from August's big runup. Yet, being bearish or bullish at this point isn't just a matter of taking the market's current temperature.The upside and downside for stocks is hashed out below, after a quick look at last week's and this week's major economic news.

By Price Headley: Part of the market's current stagnation can be chalked up to the time of year…the coming summer doldrums. Another part of it, however, stems from the fact that traders are simply unsure of what to think here. The good news is, the floors and ceilings are pretty clear. The challenge is, there's no particular guarantee we'll move past either this week.We'll dissect the details in a moment. Let's first paint the bigger economic picture. Economic Calendar

This week, markets are likely to focus on US ISM Nonmanufacturing, services and composite PMIs in the Euro area (expect increases), ECB’s Monetary Policy Decision (expect no change in policy until further ahead), and Congressional testimony by Fed’s Yellen.

By Price Headley: We knew we were due for a dip after the heroic rally three weeks ago; last week we got it. Still, it wasn't enough to snap the overall uptrend, nor the spirits of the bulls … traders ended things on Friday in a buying mood, not wanting to head into the weekend empty-handed in case the budget crisis was resolved and/or Europe doesn't fall into the ocean.