"Not sure what to make of a market that traded relatively poorly on strong apple earnings but managed to rip higher on a relatively neutral fed statement."
These are two points I made during the day today.
First on the after hours and intraday gains APPL gave up...
and then on AAPL's lack of relative performance...
On APPL's intraday trade...
As for the F_E_D...
Initial Thoughts...
"No QE as I assumed. As was widely expected, they extended the ZIRP (Zero Interest Rate Policy) from 2013 through 2014 which anchors expectations.
Other then then that, I see few items of note, from a quick browse of the statement bullet points, other then ZIRP, it's relatively unchanged."
The bottom line is what Peter said after hours, I had mentioned 4 times today, both regarding AAPL which should have really ripped with the market , but didn't...
From 12:30 (policy statement) through the close, AAPL gained .006% ($446.32-$446.58). The S&P on the other hand gained 1% (.01% $1312.53-1325.81).
And the F_E_D statement that extended ZIRP through 2014 was a little vague and widely anticipated. Again, Peter commented,
"Yet I thought the Fed was disappointing. 2014 seemed like a big concession, but low clearly means 1% or lower, not 0.25%. Will change if economy changes anyways. No mention of new QE3."
This is pretty much what I had said, no hint of QE 3 and really no real changes that weren't already expected. However as I showed in the last post and warned about several days ago as well as yesterday and today, "Beware the F_O_M_C Knee-Jerk Reaction!"
Beyond AAPL, the 3 major industry groups, the "3 Pillars" as I call them (simply because any rally is hard to sustain without the support of Energy, Technology and Financials) were oddly off today, except for Energy, but I'll show you why that was a given.
Here's Energy in red, the SPX in green and the obvious driver behind both Energy and the SPX, the Euro in light blue.
As for the VIX Signal (Market Sell Signal) that was completed last night, I decided to construct the set of conditions that make up the signal and look at their reliability in the past as this is a rare signal.
Here are the next 4 signals, the first did lead to a decent pullback, however note that the first 3 all fell within Quantitative Easing periods and if anyone remembers, there weren't many indicators, the least of all the VIX that could keep up with the F_E_D's relentless pumping of cash into the market, remember the motto of QE, "Just buy the dip!". So we have the first VIX signal to occur since 2008 that is not in a QE manipulated market.
The S&P-500 is now at its long term downtrend resistance trend line.
And these are the two areas I mentioned last night that have striking similarities, again: they both started with sharp declines from a top formation. They both halted their decline on heavy volume (red), they both went on to make a new low that kicked off a strong rally and they both rallied on declining volume as well as declining internal breadth. Now, as of yesterday, they both have a VIX sell signal.
As for the market today, as I posted numerous times, there's no disputing that today's gains were a direct result of FX legacy arbitrage (strong Euro/weak Dollar).
SPY vs the Euro (FXE).
Here's the Euro since the policy statement through the present...
It's interesting that such a parabolic vertical move ended right at the market close.
Here's the Euro on 3C through the NY close.
The 2 min negative divergence is enough to cause a consolidation and that is what the Euro has done since the close, traded laterally and slightly down.
The 2 and 5 min 3C charts are fast enough that they could easily confirm today's move up, but neither did.
SPY 5 min
My guess is that HFT arbitrage algos were chasing momentum today, I doubt very much that smart money was chasing this move and 3C seems to agree.
As for some other charts we've been watching, one of the top performing ETF's over the last several days and is starting to get a lot of news coverage is our UNG.
UNG has gained about 18% over the last 4 days and put in a decent close today. I didn't listen to the Obama speech last night, but I did see this excerpt, which should probably tell you something about leaks and smart money:
"UNG added 7% today following President Obama's State of the Union address which emphasized the importance of natural gas as a clean energy source."
And we noticed the change in character as well as 3C positive divergences last week! I often say that 3C can tell us what smart money is doing, but it's not until later that we find out why", I think we just found out why.
URRE is another that has been shaping up, I've been thinking and posting that we'd see a healthy pullback and that seems to be exactly what we are getting, which should set up a nice buy or add to with low risk and high probabilities.
We have the long signal, my forecast was for a pullback to the yellow rising 10-day moving average. This is one to keep on your watchlist. We "may" see a buying/add-to opportunity as soon as tomorrow, volume on the pullback has been beautiful.
What I really like about both is that they are trading on their own, they are not in lock-step with the market.
I'm going to have dinner and then pull out some scans like the Miners Trading System, back test it again, see what the results are and if see if there are any useful signals there, it's been a while.
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