Beyond the dispersion between the averages, notice anything strange about the price percentage change on this Dow 30 min chart recently?
From the 2 year yield to the 30 year yield, there was curve flattening on the week with the short end higher/long end lower by 8 bps on the week thus far (yield curve flattening has predicted US economic slowdowns 94% of the time since WWII). However we barely need anything like curve flattening to tell us the US macro data as well as world macro data is down the drain.
As you may know, I find it hard to believe that the F_E_D would start the process of hiking rates tomorrow by removing the word, "patient", at least that's what the market will be looking for as an omen that they'll have room to hike in June. It just doesn't make a lot of sense to tighten conditions as the economy is seeing such horrible performance, but that may be just it.
I also don't think the F_E_D should have rates at ZIRP over the last 6 years as if we have been in dire emergency circumstances since then, I of course believe this has been a stealth bailout for the banks. However the FE_D may see something coming as we all seem to and realizes there's little it can do painted in a corner at ZIRP.
Whatever it is, I believe the F_E_D is much more afraid of something that we are not aware of than they are of hiking rates and sending the economy in to a worse tailspin, what that something is, now that's a truly frightening question.
Despite the horrible looking Leading Indicators and Perhaps a Surprising Change in Dollar Direction, most of the averages closed in line on an intraday basis today, although several had some larger moves in longer timeframes which I mentioned this morning wreaked a bit of panic.
While none of these are smoking guns, futures do have some interesting tidbits from last week/this week as this week was the first time the Q's and SPY have had a chance to move out of their base which they did for a day, today I'd barely call it much more than flat.
Today's dispersion was just a mess.
I see volatility, I honestly don't see what I'd consider a market leak, although I wouldn't trust the F_E_D as far as I could get inside the building or an outside auditor for that matter.
Even from a candlestick perspective, it's hard to pull anything out of the market except massive volatility, but it's also interesting where it occurs.
SPX massive daily ranges in the candlesticks
Dow, also massive ranges as you know. Both are right in the area of the head fake moves that were retraced, a bounce from below that former support level made perfect conceptual sense. The rotations and dispersion since, that's obviously not something you'd call "healthy " in a market, but at the same time, this doesn't look like a market going in to the most important F_O_M_C meeting in years as each one from here on out will be called.
Thus with the way things sit, I'll be very interested in overnight Index futures action and tomorrow right in to 2 p.m. which ironically was our call/forecast last Wednesday, a market bounce right in to the Wednesday 2 p.m. policy statement.
If there's one concept that has been rock solid it's "BEWARE THE F_E_D KNEE JERK REACTION". I don't believe there's been a meeting that has gone by over the last 5 years in which I haven't warned about that in capital letters. More often than not there's an initial knee jerk reaction, sometimes hours, often days, sometimes weeks, but it's almost always the wrong reaction and is faded so be careful on any assumptions immediately following the meeting or the press conference.
While everyone and their uncle has a guess at what the F_E_D will do, I suspect they take a little and give a little, such as maybe remove patient, but perhaps say that they won't be hiking rates in
June. Don't take that literally, it's just an example, but that would be my gut feeling, that would obviously cause some crazy volatility, but I just remember charts like these...
For the most part, Index futures are in line on the intraday charts except ES is starting to diverge.
As for some of the assets I'm interested in, you know I mentioned IWM, I just didn't see it today with a market that looked more confused and ineffective than anything, that's not quite the edge I'm looking for, but it is a message of the market and deserves to be put in with the rest of the pieces of the puzzle.
Internally today was a near mirror image of yesterday which had stronger readings in Industry groups. Today 8 of 9 S&P sectors closed red, but not VERY red. The leader was Tech at a not very green +0.02% gain and the laggard was once again materials at a 1.11% loss. Yesterday 8 of 9 sectors were green so the mirror opposite.
As for Morningstar groups, of 238, 106 closed green, that wasn't the mirror opposite of yesterday's 211 of 238 green.
There wasn't a true Dominant Price/Volume Relationship, again the averages are all over the place. The only 2 that got close were the Dow with 20 stocks and the NASDAQ 100 with 57 stocks, both closed at Close Down/Volume Down which is the least biased of the 4 relationships, I often call it "Carry on" as in do what you were doing because it doesn't have a 1-day or next day bias. The R2K didn't have anything even approaching a Dominant relationship, nearly evenly split between the 4 possibilities.
Finally I took a look at the Daily Breadth Indicators which I've been updating you on as we go over the last several weeks.
Last night I posted the readings that showed less than half of all NYSAE stocks (the biggest market average) are above their 40 and 200 day moving averages, more stocks are below them than above.
Tonight...What strikes me more than anything is the absolute lack of movement in any direction on the day, most indicators (breadth) just make a lateral, flat tick across today, not moving either way, which I suppose is appropriate considering the closes among the major averages, but it's as if the market were frozen in time or fear.
Well that's going to do it for now until I look at futures later in a few hours to see if there's any more movement. I'm not going to try to guess at the F_O_M_C beyond what I've already said, although I do have some strong opinions about it. If you can, watch the market as the policy statement and I believe we have a press conference tomorrow, take place, this is where I have found some of the most interesting market reactions, one kept us in short positions the day QE3 was launched although every bone in my bosdy said "COVER!", the reaction to questions and the charts said "Hold" and we did and saw the market move down nearly 10% from there and not recoup for 4 or 5 months to that level which was the highest high ar 2:24 the day Qe3 was announced!
Have a great night, I'll let you know if anything pops up.
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