Traders have always been known to be skeptical and superstitious, however there are several coincidences I just can't ignore.
First in the recent chain was Bernie's comments on that fateful Monday morning-March 13th, premarket and the first trading day after the market experienced its first weekly decline for the year, also right at the end of the quarter/window dressing. As I commented that day and JPM also put out, Bernie's comments were ambiguous enough to allow the market to interpret what he said however the market wanted. It was only after a string of regional F_E_D presidents made a series of comments that were dismissive of more QE and talked openly about raising rates perhaps before what the F_E_D had previously guided, that we started hearing the talking heads saying the market misinterpreted Bernie's remarks.
Ironically, the squid, Goldman Sachs who has been shown to prey on their own clients, came out with a long Russell 2000 call on March 15th, along with Bernie's own comments this created two bounces in the market, one on the 26th of March and the second last week on 4/2, both which we saw distribution in to. The timing of Bernie's comments along with Goldman's "FREE" research call, long the market were suspiciously timed. Goldman just said they exited the trade at a small loss, just after Friday's NFP, which even I could predict based on the economic data reports. Then the talking heads come out and say the market misread Bernie's comments along with a slew of F_E_D regional presidents.
All of this created enough updraft in the market for smart money to do what we've witnessed, sell in to price strength and now seemingly the worm has turned, not only from the F_E_D, but GS and the talking heads (mostly on CNBC), which sure would set up a nice bearish climate for smart money to capitalize on short positions set up over the last 3 weeks or so (an argument could easily be made based on the charts and breadth, for much, much longer then that).
Do you really think Goldman gave out free advice to all of us- the non-clients and GS took the same trade (long the Russell 2000) when they routinely take the other side of trades against their own clients? Forget about the distribution we have seen (which can be selling or short selling)!
While I doubt it will ever be proven, I don't doubt the F_E_D is in bed with Wall Street and is part of creating cycles and reversals of those cycles and we are really only talking about GS, the F_E_D and talking heads, forget JPM and others.
In any case, Non-Farm Payrolls did exactly what I suspected and missed big, which has ES looking like this tonight...
Futures thus far look like this...
The dollar is gaining ground (market negative) as the Euro loses it as FX markets opened tonight.
Gold is one of the only assets with an inverse correlation that is up as the Indian Jeweler's strike ended this weekend so Gold demand will be back, I also wouldn't be surprised if Gold saw some safe haven buying, but we'll have to see if that holds, that correlation has flip-flopped many times before.
I will say this, DO NOT BE SURPRISED to see a market bounce, whether intraday or longer (and who knows exactly when), but it will be based solely on the QE Hopeful Crowd that sees the NFP print as deterioration that might give the F_E_D thoughts of QE. From what I've heard from regional F_E_D presidents over the last week or two, this right now is a long shot, they are in a wait and see mode, not excited about more QE, doubtful that it has worked, but the QE addicted crowd will at least try to take bad news and spin it in to a positive. I doubt they get far, but look for it to happen, this is just part of the market's irrational behavior.
On the other side of the coin, so many US economic reports have shown the worm has turned and again, coincidentally only after we moved out of their arbitrary seasonal adjustment period; meaning there's not that arbitrary fudge factor they can use to make reports look better then they are, which even casts the strength that some thought was taking hold in the early part of the year (first few months) in doubt. Perhaps there never was any strength, it may have just been fudged over with seasonal adjustments, the timing sure would suggest that is the case, another interesting coincidence.
However, this is not the worst of it. Europe will be the worst of it moving forward with a particular emphasis on Spain. If there were a PIIGS country that is TBTS-Too Big To Save, Spain would be it and the one that brings down the house of cards. Things in the EU have taken a turn for the worse and maybe the worst seen so far, although the market will be slower to realize what a powder keg Spain actually is.
China is another. The mixed data is striking in the divergences between what the government there says and what limited reality on the ground that actually escapes the government's grasp suggests.
These will be the first two major issues that should really be kept on your radar. Commodities will tell us more about China then any Chinese PMI data. Yields in Spain will tell us more about how serious the situation in the EU has become, Greece will look like an opening act compared to Spain. The politics of several countries, Greece and more notably France, which are coming up, may re-shape everything that has been done in the EU so far and not for the better. If the status quo remains, then things still get worse in the EU, if Sarkozy loses and Greece's elections get nationalistic, things get worse, perhaps worse then any one has even dared to try to discount.
Two things really stick out in my mind, one the coincidental timing of events since March (or even since the New Year) and where we are now and the nature of the US economic reality-I have doubts as to whether there was ever any strength in the seasonal adjustment period and I wouldn't blame or look down on anyone who saw the events of early this year as a golden parachute for Wall Street to reposition themlves for reality , not the same reality that has been for public consumption which is just starting to show the worm has turned. The most succinct example of this is Goldman's losing long Russell 2000 call which was supposedly "closed out". Do you really believe GS was ever long the R2K during their long call? All of the seasonal adjustments, F_E_D speak and backtracking, "new" media attitudes like, "the market misread Bernie's statement", etc, all are a bit too coincidental for me and that is without even considering what we have seen on the charts with our own eyes.
I believe if you look at all of these events (which are only the tip of the iceberg) have led us from a planned and manipulated transition from this...
to this...
to this...
Even if you dismiss everything I said above and think I'm simply paranoid and we do have free, fair and open markets, I would remind you of the breadth posts and how seriously the internals of the market fell apart even during the strongest part of this year. The breadth alone tells the story of what has been going on and what I have been talking about and showing you every week and every day. Price is often deceitful. Remember that a simple 3 day -1.7% pullback in the Dow-30 put over a month of longs at a loss. This is why I have said, "I wouldn't be long anything in this market" (generally speaking) because when the worm turns, it turns hard and fast.
Have a great week, it should be an interesting one.
