Overnight and in to the open

Interestingly, after the F_E_D essentially did nothing yesterday except change the order of some wording for the most part, those in the media who presume to hold the mantle of "Unofficial F_E_D mouthpiece", took to writing about how the F_O_M_C sent strong signals yesterday, these same people or person in particular were quite vocal in hinting we'd see QE3 yesterday.

European trade started with Spanish and Italian benchmark 10 year yields declining on hopes that Draghi would reactivate the SMP bond buying program today. As for the rates decision...

2 August 2012 - Monetary policy decisions

"At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.75%, 1.50% and 0.00% respectively.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today."

UNCHANGED...

What everyone was really waiting for...

As the Draghi press conference started, the Euro rallied, bonds rallied, optimism was everywhere until the market realized that Draghi punted by promising future promises instead of acting as he had so strongly hinted the ECB would today. As the WSJ said last week, ECB expectations of the SMP reactivation are baked in to the market, if Draghi fails to deliver....

Everything turned 180 degrees and the longer, more important chart of the $USD with 3C showing it very bullish and the Euro looking very bearish all of the sudden was realized as the $USD ripped higher, the Euro lower. Essentially Draghi just delayed. He did say the ECB, "May" act in coming weeks as well as repeating much of what was already said, but proof is in the pudding.

Here's the pudding:

 ES as Draghi punts pre-market...

 The Euro/USD again, falling as Draghi punts

A closer look of what hopes dashed looks like with the Euro plummeting. 


I'm not sure much else matters right now, as I had said about the 3C charts, "When in doubt, go to the longer charts with less noise, they were negative". I said the Risk Asset layout would probably give us our biggest clue, it deteriorated all week. Is this because there was a leak? I don't think so. The Bond markets are much bigger and more well informed than the stock markets and last week and this week the bond markets weren't buying what Draghi was selling, I think the underlying action in the stock markets was a reflection of that.


Updates coming... For now though, it appears we are going to get our short term trend expectation, take a look at the SPY daily today...


We are looking for a move somewhere around the red area below the bear flag...

More as it comes in...