Overnight Insanity...

The BOJ is already out of control with the biggest, most ambitious QE ever seen, I'll never get why Central Banks think the problem to solving debt and deflation is to create more debt and print more money? I've had debt and I've created more (not as official policy mind you), point is, it didn't make the first debt any smaller. So the BOJ offers to buy up $300 bn Yen in debt with a 10+ year maturity and $600 bn in 5-10 year government debt-ah... They are following the Washington model, then just like Bernie saying, "The F_E_D isn't monetizing the debt" when they hold 1/3 of the long dated treasuries, in similar fashion Abe took a page from Bernie's book and says the BOJ "Isn't directly buying government debt".  Well no poo! The F_E_D isn't either, they send the Primary Dealers/Banks to buy it at auction as most Central banks are banned from buying at primary auctions and then they buy it from the banks, so Abe's statement while actually factual, is really just smoke and mirrors.

I read somewhere that the world's biggest stock markets were trading like "Penny Stocks", that's true to some degree, that's volatility, it means things aren't as clear cut as the bulls imagine them to be, we can see the multiple red flags everywhere, they can't see the most basic red flag, "Uncertainty", it doesn't matter what the F_E_D does from here on out, buy or not, they created uncertainty and money managers aren't going to gamble on what the outcome of that uncertainty will be, although I think the F_E_D has made it quite clear what the outcome will be-the end of QE long before anyone expected and the start of policy normalization which has always sent the market in to a bear-tailspin. It's just this time they have the largest policy accommodation ever, so the effects of the tailspin are beyond precedent and I'm by far the only one here in our Wolf pack that has known this, many of you have been sending me articles and videos that have made clear you understood the same things, because you pay attention to what's going on and not just what artificial level they can get the SPX to before dropping the hammer. Does this really look like a healthy, sustainable trend to you or does it look like "Loot the store as fast as you can before the police (read as: consequences) arrive?

Honestly, you have 22 years of SPX trends there including the very parabolic tech move, look at the last year and a half and especially this year, even when we had strong QE and strong hopes it would work we didn't see this kind of move, the different? The market has known since September the F_E_D has figured out it's not working for the economy, it's just blowing massive asset bubbles that must pop and the bigger they are, the messier the pop will be, but was it really that hard to foresee? Has anyone here ever reduced their credit card debt by spending more? Have you ever seen people more willing to spend when their money is worth much less?

I DIGRESS

The Nikkei has moved nearly 2000 points from high to low over the last 2-days, gone are the recent days of nothing but green closes in Japan. After the CME 33% margin hike on Nikkei related anything that trades futures, I said yesterday, "Watch the Nikkei", one of the largest markets in the world, it moved up 3% and then down 3% and closed just barely green.

European markets were trading near their lows just after a better than expected, German IFO Business Climate Survey was released? Why? The EU has no real QE per se, not like we do and for the US now, any good news is bad news as it hastens the F_E_D's ability to exit, which is the biggest QE Europe has, it also means their CB, the ECB is less likely to cut rates.

European Sovereign Yields widened to worse levels, why? The funding for Sovereign EU Bonds has come almost exclusively from the Yen based Carry trade which is fallen apart and being unwound as I showed hints on months ago. Guess what that means? More Yields above the unsustainable 6+% and more bailouts needed "Coming Soon to an EU member nation near you" So the mess gets messier as Central Planning turns out to be the farce everyone on the opposite side of Krugman have been saying for decades.

Today should be a light day for the US with a 3-day weekend, NY city traders will be slamming the trunks of their Cadillac Escalades shut around noon for their trip to the Hamptons.

My guess right now, timing is sticky with an op-ex day and a 3-day weekend, is that something like this will unfold...

 SPY 1 min intraday may or may not fill the gap, it will tell us something either way, but isn't that important, if it's not filled the bounce I think we get as a shakeout goes up in probabilities as the gap needs to be filled at some point, whether today or on a bounce.

 The 5 min chart shows the recent extreme damage, but also a mellowing around this range, watch for a head fake move below the range, that will be good for positioning if we confirm it is a head fake move which I give about a 75% chance to now.

We'll just pick and chose our battles for some nimble, hit and run trading while building out the big picture positions that are doing well this week.