Recap of events...

The main theme today was certainly Bernie's testimony on the Hill. What is the F_E_D up to? Overnight the F_E_d's #2 strongly suggested QE was coming, other F_E_D speakers this week have all but come right out and say the same. The Chinese cut rates and the market started dreaming of the global Central Bank intervention of November 2011, Bernie's testimony on Capital Hill seemed like the perfect time to hint at QE 3, yet it didn't come. Why would Yellen be out there hours before Bernie testified saying nearly the exact opposite of Bernie? Is it realistic to think that the number 2 at the F_E_D doesn't have a clue as to what the chairman is thinking or more likely was this some sort of subterfuge?

The market didn't like Bernie's prepared remarks, but it was willing to wait out the Q&A to see if he might slip up and hint at QE, he didn't.

The initial reaction to the prepared statement and a holding pattern during the Q&A, the market didn't seem to be inclined to leak much lower, it seems 3 p.m. the panic button was hit and the invisible hand got to work.

This is the area I warned about yesterday as far as volatility and some game plating in an attempt to anchor expectations.

Although Gold, one of the biggest beneficiaries of QE, had a horrible day, it was curios during the afternoon. The initial disappointment with the prepared remarks is seen at the first red box, then a holding pattern during the Q&A session in yellow, once it was clear that the Q&A didn't yield any hints of upcoming QE, gold sold off again, but it was then content to spend the rest of the afternoon in a range. As mentioned several times, it seemed like the market was also content to sit in a range, 3 p.m. that changed and I suspect it was intentional.

Around 10 a.m. Fitch warned about a possible US sovereign downgrade, the market didn't seem to take much notice.

Around noon time Fitch cut Spain's credit rating not by 1, not by 2 but 3 notches to BBB (junk) on the banking sector problems-it seems no one is buying any EU rescue plan and for good reason; they have no credibility. This is the 3rd Spanish credit rating downgrade, Egan Jones, S&P and now Fitch. Again the market seemed unmoved, even the Euro didn't over-react, in fact after the downgrade from A to BBB "outlook negative", the Euro did manage one more intraday bounce.

As we saw last week, the cost of a Spanish banking bailout is rising exponentially, the current estimate is between $80 nd $100 bn Euros, if memory serves me correct, it was $19 bn then 20 something, then $40 something, now as high as $100 bn and I'm sure we are not done.

Merkel (as Germany is the only provider of funds now as the ECB has gone radio silent) said she was willing to use existing bailout mechanisms to help Spain, it remains utterly unclear whether Spain has asked for help or not. There were newspaper reports saying Germany and France were pressuring Spain to seek assistance, followed by a denial from officials in Spain, followed by a plea for help from Spain and now it seems no one knows where Spain stands. It is clear where Merkel stands though, I'm not sure what was bigger news, that Merkel was willing to help Spain via EXISTING instruments or the fact that "existing" ruled out Euro-Bonds which should again ignite the North vs South divide as France aligns with the PIIGS with regard to Euro-Bonds while Germany clearly (Merkel' statement was the latest confirmation) DOES NOT support the idea.

At 3 p.m. Consumer Credit missed and missed big

Released On 6/7/2012 3:00:00 PM For Apr, 2012

Prior Consensus Consensus Range Actual Consumer Credit - M/M change $21.4 B $12.0 B $7.5 B to $18.9 B $6.5 B

 CC came is at nearly half of consensus and about a 69% decline from the previous, this was a huge miss and more or less is timed with the market sell-off, however it just seems very strange that there were much bigger disappointments in the market today that didn't have the same effect.

A quick look at the SPY intraday seems to suggest something a bit different.

It seems the 12pm - 1pm move higher first alarmed the market (and you know who I mean, it seems they were not wanting to see the market move higher and that's where the first significant divergence (other than the open) occurred. Consumer Credit may have been used to further the cause, but it seems concern was starting earlier as the market started to trend higher.

3C trade in the intraday timeframes of 1-5 minutes was generally uglier than the close would suggest (mixed between down about .30% to up at .44% and the SPX nearly flat).

I'd expect weakness in to tomorrow's open, which will give us a chance to see what the underlying trade looks like.

Thus far Asia is continuing the US session in a risk off mode, the S&P futures are off 14 points as of now. The Euro is holding right around the uptrend line for now.

Tomorrow there isn't much in the way of tier 1 data so on the economic front it should be a bit quieter and compared to the Bernie Road Show, quite  a bit quieter on the news flow front.

That's about it for today, although I feel 3C trade was uglier than I'd expect, when in doubt, look at the bigger picture. As of Wednesday's post I tried to anchor expectations and let you know in advance this would be an area to expect volatility so I feel we're on track with the market trend (meaning behavior).  Although specifics prove hard to predict, the macro events such as the break below the pennant and rebound back above to the volatility at the test of Euro and market resistance at the level predicted, I think thus far we have been pretty much ahead of the game in that respect. There are two big pictures to keep in mind, that which is on the 30-60 min charts and that which is on the daily charts.