While the common expression involves dogs, the analogy holds true for the market’s bulls and bears. 

As you’ll soon learn, a simple ringing of a bell will send these two dogs in the caption into savage frenzy.

It was easy to anticipate that when the markets broke their compressed multi-day range that the reaction would be a significant move. However, it was not as easy to anticipate what the catalyst would be, or what time of day it would occur.

Both the source of the ‘awakening of the dogs’ and the timing of it will play a big role in the result. They will also impact the subsequent trends.

Keeping with the sleeping dog analogy…

Had the awakening been as straight forward as the dogs’ owner entering the room, or in the market’s case, a PPI report at 8:30 AM, the reaction could have been as orderly as and energetic move in one direction or the other.

However, the awakening was equivalent to incitement that ensues when my dogs are caught by surprise when the doorbell rings! The dogs go crazy.

The dogs are the same as the collapse in the Turkish Lira Thursday night which roiled markets around the globe.  And, it was all incited by comments by President Trump and President Erdogan, both of whom were devoid of any concern for calming a market already on edge.

This catalyst fanned the fears of trade wars destabilizing stocks, pouring gas on the fire burning under the rising dollar, and fueling a flight to safety in U.S. bonds.

In fact if you had been watching the action of the bonds on Thursday relative to their opening range it was oddly clear that something was stirring. So much so that I ‘naively’ bought calls to hedge my stocks simply because I saw fear that I couldn’t explain.

In Wednesday’s commentary I suggested that inflation news may cause the breakout in either direction, and I suggested a potentially bullish resolution to an initial bearish move.

However, as I suggested above, the catalyst is sometimes as important as the reaction.