Here's Why I'm Not Biting

First, we are in the first day of the 2-day F_O_M_C meeting, the expectations for the meeting aren't very high, it has been the non-policy (at least conventional policy) that has really been the important stuff from the last two meetings. Unless they announce something big, I see the non-conventional policy details like the yardstick that they first started talking about which would change F_E_D policy actions according to incoming economic data rather than the traditional date guidance, which the market didn't like. Then there was more talk along those lines and then the minutes came out and we find there are a lot more F_O_M_C members, in the most dovish voting rotation we have seen in a while, that are worried or doubting the effectiveness of QE and openly questioning whether it should be scaled back or cut short. I think the real mover of the market at tomorrow's F_O_M_C policy announcement will likely be the stuff in-between the lines and n the Q&A afterward.

All that being said, as ALWAYS, remember to BEWARE THE F_E_D KNEE JERK REACTION, which has characterized nearly every F_E_D / F_O_M_C announcement for years, the initial knee jerk is almost always wrong. One of the more recent and memorable ones was last September (2012) when QE3 was announced and the market ran north the rest of the day and some of the following day, then stalled out and went sideways for weeks and then started on a move down, the initial knee-jerk of the parabolic move higher after the announcement was WRONG.

As to the point of this post, we are already past this chart, but on the gap fill and then sudden decline seen here...

I said I was not biting in the last post as the market started down with some momentum and before it was showing any signs of reversing back to the upside as you can see to the far right and as has already happened, the reason why?

This is the important part of this post and all of this was known yesterday...

 TBT with a short term positive 2 min divergence suggests it moves up and TLT moves down, which should move the market up or at least support it and give us that extra time I talked about late yesterday.

 The TBT 3 min chart has no positive divergence so this isn't a strong move or a big divergence, it's a short term stepping stone, but it's also why I was not about to bite on the move down in the market yet.

TLT is the more important signal with this 5 min leading positive showing money moving from risk assets like stocks to the flight to safety trade of treasuries.

This divergence is big and will be important, you can see from yesterday's post or you can look at another chart of a 15 min positive leading divergence in Treasuries; this actually goes out to 60 min  and in reality, even beyond, however this is the reason I wasn't biting or chasing. There look to be 2 very clear things that need to happen and while I'll be looking everywhere for more clues like this, you can pretty much just watch treasuries for now, look for a short term move up in TBT/down in TLT and wait for that to start to reverse, then I'm biting.