We can see that after the ECB announcement, the US/German rate differentials jumped. US/Japanese differentials moved also higher.
As we can see below, all types of bounds sold off yesterday, although the LEV pattern had been rather positive in the past days, indicating that the markets were expecting a reversal of the rate differentials.
Similar moved took place in currencies.
Gold also sold off.
This indicates that most investors had positioned themselves for a hawkish ECB, but Draghi reassured the markets by moving to continue buying 30B€ of bonds each month for a longer period. This means more financial repression in Europe but still probably low inflation.
With the expected renewed flow of money into US assets, it is difficult to be bearish for US equities.
After the close, a few stocks issued good earnings: INTC, MSFT, GOOGL, AMZN, etc... Of course, there are also a few negative earnings, but since the NQ8 stocks are beating in general, I expect that the Nasdaq will move higher.
I used the Breakout calculator to search for good entry levels on the stocks that issued earnings yesterday either before or after the close. I generated the table below. As usual, Long ideas are on the top part of the Table, while Short ideas are on the bottom.
The principle is to buy stocks that will break out today because of their overnight jump. For example in yellow: GOOGL, MSFT and FB can be bought at the levels indicated below (but not higher). Prices have pushed through these levels (except for FB). This indicates that we can buy these stocks only if the price pulls back to the indicated levels today.
In blue are stocks that will also break out today, but which offer a Risk/Reward level lower than 2. (Not interesting.)
In pink are stocks that have a very low probability for reaching the entry level. These are stocks that broke out yesterday, but need to pull back down to much lower levels to be bought. There are also stocks that broke down yesterday but need to bounce to levels that have a low probability to be reached.
The stocks in white look more interesting to me.
Conclusions:
The ECB's decision will naturally push more liquidity into US assets and with the overnight beats of some of the very large tech stocks, I believe that the NQ8 will lead the US markets higher today.
But at what level of interest rates will investors be more attracted by US bonds than US equities?
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