Why Black Monday Is Ancient History

The FTSE closed today at 6,192, up 3.6%, its best single-day percentage gain in just a shade under four years.

That index is now back where it was last week and Black Monday is already forgotten, as is the horrific reversal on Tuesday. 

On Monday, the FTSE hit an intraday low of 5,768 shortly after U.S. markets started trading.

However, the highs from last week were set at 6,586, so there is still plenty of room to climb higher.

I think tomorrow could be a quiet day across the pond, as they get ready for a three-day weekend there. 

Meanwhile, the Dow is already trading at the highs of this week, although still about 1,000 points lower from the high set last week, which was 17,568.

The main reasons for such a rapid recovery here at home and also across the pond could be as follows:

A halt (some say very temporary) in the relentless decline in the Chinese markets. The Shanghai Comp closed higher by more than 5%, although the buying was a bit dodgy given that it was attributable to the government buying shares of state-owned companies in order not to put a damper on the big parade celebrating China's WWII victory over Japan. If that theory is correct, we should see some buying by the government all the way till Sept. 3, the day of the parade.

Yesterday's relatively mild/dovish/rational statements by NY Fed head William Dudley, calmed things down regarding the possible rate hikes next month. Maybe the respite is temporary and once the next Fed head comes out and makes a hawkish/hardliner statement (we know that's coming), the roller coaster should start all over again.

Oil is acting a lot better now that investors are realizing that China is not dead and its demand for commodities is not going to come to a stop. Maybe a little reduced, but not a standstill.

Finally, and most importantly, maybe we are up along with the FTSE and the rest of the world simply because the machines want us higher, or the HFTs, or maybe the flash boys.

Or maybe, like the Chinese government is buying shares in their markets, the Plunge Protection Team is actively buying in ours?

Yes, simple as that!

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