Morning Note

Roughly a half-hour before the open the Dow future contract is trading about a half-percent higher, S&P 500's contract is up .35% and the Nasdaq future is up 0.13%. Oil and copper are up nicely, silver's down and gold's catching a tiny bid (up .08%). Ag commodities (our newest core position) are mixed. The 10-yr treasury is trading lower (yield higher), European sovereigns are up (yields lower) across the board.

Bloomberg's Tracy Alloway comments facetiously on this morning's action in equities:

"Overnight we saw mass social unrest, continued culture wars, the prospect of martial law, a curfew in the world's biggest financial center, and the looting of a retail icon. So naturally, futures are up."

All facetiousness aside, the above quote pretty much captures the disbelief among investors who've been around the block a few times. Apparently, per Bloomberg yesterday, hedge funds, for example, have by and large sat out this impressive snap-back rally. 

While we at PWA haven't sat the rally out -- in fact we've been quite pleased with our core allocation's relative results of late (particularly when we adjust for risk taken) -- we entirely sympathize with the sentiment reflected within the hedge fund community. I.e., the fundamental risk/reward backdrop screams caution right here.

As for those with the stomachs and expertise to actually play the short side (speculating on a market collapse), well, let's just say they've been a steadfast bunch for weeks.

Particularly in the S&P futures pit: