Market Update – sentiment seems to undergo a complete 180 degree switch overnight; be suspect $SPX

· Market Update – sentiment seems to undergo a complete 180 degree switch overnight, as the China/US manufacturing updates for Aug have taken some of the “double dip” fear scenarios off the table (for now at least).  While the rally today is powerful (sp500 on pace for largest % increase since 7/7), in terms of tone/flows, there hasn’t been a ton that has changed.  The markets are still dominated by technicals (i.e. the 1040 level held in 3x in the last few days – twice last week and then again on Tues morning – confirming the low-end of the rough trading range that has been in place really since late May) and “macro” trades (equities continue to trade as single group w/o much sector or stock discrepancies on both up and down days; the increased correlations among SP500 components has been a theme of this market for months now).  The preferred vehicles for stocks remains ETFs/futures (not so much single stocks) and not many people have high conviction levels looking out beyond a few days.  Some start-of-the-month allocations (i.e. out of Treasuries, which were big outperformers in Aug, and into equities, which lagged) are helping today also.  As much as equity investors were enthused by the manufacturing numbers this morning, the real key for stocks remains Treasuries – this was the case on Fri (when they sold off sharply following Bernanke’s more hawkish comments and is happening today) as well as today.  The 10yr yields are moving up towards the upper-end of their recent range but will have to break up through ~2.65% in order to see sustained weakness