How sustainable was yesterday’s rally? The low volume suggests that the major dynamics at work yesterday were short-covering.

Market action could be expected to remain somewhat muted this week but position squaring ahead of the NFP data on Friday - which is ahead of the long Labor Day weekend in the US - could produce some surprises.

Almost every commentary and item of financial analysis that Clive Corcoran has come across at present is talking about metrics of historic proportions.

The yen is at a multi-year high against the dollar, a fact that reflects the unease which is also keeping the yields on several key government bond benchmarks at or near historically low levels.

Clive Corcoran is still of the view that the Russell 2000 looks vulnerable to a test of the 585 level.

If we should close out the week with EUR/USD below $1.2740 and sterling below $1.55, this would suggest that the likelihood of a more invigorated US dollar is increasing, perhaps as a corollary to further risk aversion if the retreat in equities gathers pace.

1130 would still pose a formidable overhead barrier for the S&P 500, but a further target around 1170 which was the bounce level following the May 6 selloff, would be in need of testing and surpassing in order to add conviction behind a longer-term positive outlook for this index.

For latter September and Q4, Clive Corcoran suspects that the headwinds of deflationary pressures will prove too strong and the bears will take control of the agenda.

The 1110 level for the S&P 500 appears likely to be tested in today’s session and a close below that level would energize the bears.

The yield on the Two-Year U.S. Treasury has dropped below 0.5% for the first time in history.