A slow summer trading session may remain the main theme after day. There is a little reason for European traders to push markets higher today. This is despite the fact that Wall Street eked out another fresh record high yesterday but still ended the day mostly flat. Most of the momentum was built on the fact that the Chinese economic data hasn’t fallen off the cliff.

The truth is everything is in holding pattern and investors are looking for direction. this could come from a strong earnings season or the Fed running a loose monetary policy. Complacency remains a massive concern because there is just too much optimism among investors and this can easily lead them to disappointment. The expectations are that the trade war issue will be resolved, the Fed will cut interest rates by at least 50 basis points this year and the People Bank of China will also adopt a more aggressive accommodative stance towards their monetary policy. By looking at this one can really understand why the US market are still making fresh record highs. Smart money understand that this is a tall order hence there is a strong need to buy protection which is selling at a decent discount.

Today, investors are focused on two major things. Firstly, it is the US retail sales number which needs to deliver the same message as the Chinese data did- the trade war isn’t really a massive concern. But the reality is if the trade war isn’t leaving any dents on the two biggest economies of the world, especially the US, then one should not really bet on the hopes of loose monetary policy by the Fed. Secondly, today’s trading action is primarily going to keep its focus on earnings; the Wall Street giants JPMorgan Chase and Goldman Sachs group will be reporting their earnings today. After Citibank’s drop in trading revenue, the US banks dropped yesterday and the big question is if the weakness in the banking sector going to pull the major US bench marks lower?

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Moreover, the ratio of the CBOE VVIX index/CBOE Volatility index has soared and this represents nerves kicking in. From the chart below you can see that when the index touched the level of 7 back in April, the equity market experienced a massive correction.

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