However, as you may recall last week in our forecast, IMPORTANT: AAPL Set-up & Market Movement, not only did we suspect the whisper number was correct with a massive payrolls miss on Friday as the market was closed (except for Futures which traded for 45 minutes after the NFP was released), but we suspected some "Talking F_E_D" would come out with some ULTRA_DOVISH comment, some suggesting a mention of QE4 to get those headline scanning algos (the same one's who sent TSLA up nearly +1% on the April Foll's joke of their release of the Model "W" for WATCH!).
Here's an excerpt from Thursday's f\market forecast using AAPL as a proxy for the broad market (linked above)...
"The NFP tomorrow could be the catalyst for such a move (the breakout of the triangle I was pointing out), especially if it comes in on the light side and even more so, if the conspiracy minded crowd is right that the F_E_D could use that as an excuse to kill $US Dollar Strength by mentioning something DOVISH like, "We probably won't hike rates this year" or something mentioned about QE4.
THIS DOES NOT MEAN THIS IS WHAT THEY ARE REALLY THINKING, IT'S AN EASY WAY TO TALK THE DOLLAR DOWN WITHOUT HAVING TO CHANGE THE COURSE OF THEIR TIGHTENING PLANS"
There was a lot more on the subject, I thought that excerpt just summed things up nicely and so far has been on track as was pointed out yesterday morning in AAPL Proxy & Conditions primed for F_E_D.
Although I suspected it would be Bullard who came out with the wildly dovish comment that the market would chase and the dollar would run from, it was Minneapolis F_E_D President Kocherlakota just a short time ago.
The exact comments were right on track with the QE4 theme. Again remember what I said in the second paragraph of the IMPORTANT: AAPL Set-up & Market Movement excerpt above (in CAPS) and remember yesterday's comments that if the $U"SD didn't start showing some weakness soon, we'd be hearing from the F_E_D on one of these cockamamie quotes from someone connected to the F_E_D (we haven't seen the $USD weaken overall as it just pushed back to pre-NFP levels as mentioned in this morning's A.M. Update)...
Kocherlakota in a pre-announced speech in Bismarck, North Dakota this morning said a couple of things we might have expected....
Like there's a "Theoretical argument" to be made for making asset purchases if the economy faltered, in other words, QE-4. It seems the F_E_D is the only one who has been hiding their head in the sand as the economy and macro surprise index slips lower and lower all of 2015, to the point they couldn't retain credibility without mentioning it in the last F_O_M_C policy statement, in which they toned down their assessment of the economy, way behind what the actual economy has been showing. This has seemingly been on purpose as I suspect they are on the path to tightening and a rate hike and for a reason that may be scarier than we know, a soft economy and employment doesn't help their cause and a strong dollar helps less.
Kocherlakote also said the "Debate ABOUT raising rates is a drag on the economy".
This is an important choice of words, it isn't the possibility or probability of a rate hike that is a drag on the economy if we take his words as well chosen, but rather the debate which comes right back to the thing the market hates the most, UNCERTAINTY.
Kocherlakota is probably right if what he said is what he meant and the economy and market would probably be less upset with an actual rate hike and that certainty put to rest than the actual debate. It's the same concept as , "When the missiles fly, it's time to buy".
Forget about the bias of the market of buying or not, it's the uncertainty. It's not that the market likes war per se, although some sectors/stocks obviously benefit, it's the uncertainty of what will happen in the pre-war saber-rattling that the market doesn't like or put simply, it's uncertainty that the market doesn't like. So if Kocherlakota did in fact chose his words carefully, the Dove may be actually saying, GET on with it one way or the other.
The difficulty right now is that in the initial news I'm finding more economist parsing of what they think he said than what he actually said, which I'll spend some time on later, but even if he did say
“Under my current outlook, I continue to believe that it would be a mistake to raise the target range for the fed funds rate in 2015.”
As I said, I'm finding more parsing of words and economists arguing their points than actual full context quotes, the effect is the same, the intent and timing are the same.
The problem... I haven't been very fond of the way the market has been trading this morning. As you know from last week's forecast and last night's Daily Wrap a well as yesterday's updates, I see us as early in making the move out of various triangles throughout the market, yet they have shown a great deal of distribution immediately after making higher prices to sell in to.
This morning has been a strange morning and the Kocherlakota words, apparently aren't having the same effect as the Jim Bullard flip-flops unless the market is simply getting tired of the F_E_D trying to talk the dollar down just like it got tired of Draghi doing the same until the half life of his "talk" was about ZERO.
The USD since Kocherlakota...
The intraday breadth as represented by the NYSE TICK data is not helpful here either.
While VIX futures that no one was interested in over a long 3-day weekend with the Employment data out on a market holiday and the possibility of a Greek default looming, is now changing its tune and is positive for the second day in a row in to lower prices, now protection is being bid as pointed out yesterday suggesting some rotation out of risk assets and in to protection as prices give bigger institutional money the opportunity to do so.
I did expect this to happen, but I didn't expect a 1 or 2 day event. Any head fake move is meant to be convincing, while I'm using AAPL as a proxy for the general theme found last week pretty much market wide, it's not specific to AAPL, it's more of a proxy for the broad market and this is not what I had in mind...
I don't want to jump to conclusions and I do want to give the market some time to digest Kocherlakota, but this is not the reaction one would expect from a similar event if it had occurred just several months ago.
I'll be digging through some charts to try to find some answers, so far it looks like they need Bullard.
While I don't want to pretend I know what Kocherlakota is up to or how genuine his comments were vs how much they were meant for a specific task , we need to remember to keep our eye on the ball. The Strong $USD is the F_E_D's enemy right now and if we take that to its logical conclusion, if they manage to knock it down, guess what follows? The Carry trade,$ 9 Trillion is $USD carry since about 2008 that gets unwound, and you know what that does to the market.
More as I have it...
Amazing that this whole scenario since before the NFP was easily forecast in its likelihood and is now playing out exactly on cue. I don't think any of this is coincidence ,, from the triangles to the NFP leak to the F_E_D comments slowly coming out with greater and greater force (Dudley yesterday, Kocherlakota amps it up a bit more today).
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