Futures Discounting More Fundamental (News) Surprises

Tonight correlations are all over the map, futures are discounting like they did with the Syrian "Diplomacy early last week" that which surprises the market. In the case of Syria first we were about to attack "imminently and at any moment" (sending the market sharply lower for a day) and then a gentle slide to a pass to Congress followed by what is now definitely a known Kerry plant that led to Russian led diplomacy which is like letting the mafia guard the bank vault, but it saved Obama from having to act on that "red line" comment he made about a year ago as only 10% of Congress was supportive of his "plan" which was really just smoke and mirrors, the perfect way out from an embarrassing vote that was first up-ended by every one of our allies except for the French president who was in no rush to schedule a vote (more talk and no action) and the failed UK vote for the first time in, well since we gained independence from them and they became a perpetual ally. A defeat in Congress handed to him no less by his own party wouldn't look good so it's apparent now that Kerry's "slip of the tongue" was more like an administration plant to invite Russian/Chinese/Syrian diplomacy and now the entire thing is in the past. The US is really going to let Russia (Syria's strongest ally) broker and vouch   for Syrian compliance in disposing of the largest chemical weapon stockpile (as far as gas goes) in the world and the US, UN and NATO are going to accept this? If it means not having to do what Obama obviously can't do, then they'll let Syria hand over a token amount to Russia, Russia will say that's all of it and Obama will talk tough, but in the end claim a diplomatic victory when it's all just been a face saving farce because someone ran their mouth a year ago about red lines and when those red-lines were crossed, didn't have the support or the backbone to do anything about it which should bode well for future Iranian and North Korean problems that should be heating up any minute. I'd like to be a fly on the wall in any house in Israel right about now. Perhaps the Israelis will go ahead with a strike  just to make sure no one in the region gets any ideas that they have gone soft too.

The fact that the market is "OVER" the Syrian situation is pretty plainly seen in crude prices tonight, especially on a VERY weak dollar (crude usually is up on a weak dollar).

Crude dropping pretty severely on the open of futures for the new week, even though the $USD is down sharply as well, albeit for a different reason. It does look like Crude will be choppy in the near term, although I'd be watching very closely for signs of a big sell-off.

5 min $USDX futures gap down, but look like they are forming  or working on forming a larger base.

With the $USDX down like this, the natural correlation for crude would be to gap up big time, but the Syrian situation is now seen as "out of the woods" .

The $USD on the other hand is part of discounting another fundamental, unexpected event.

It was just last week that the rumors were floating fast and furious that Obama was going to nominate noted Hawk, Larry Summers to take over for Helicopter Ben right after the F_O_M_C announcement on Wednesday, this seemed to be all but a done deal, THEN OUT OF THE BLUE, LARRY SUMMERS DROPS OUT OF THE RUNNING FOR THE F_E_D'S TOP SPOT (which is why the market is up, the $USD down, etc).  Ironically and somewhat laughably in my view, the F_E_D insider or "unofficial mouthpiece", the WSJ's Hilsenrath is trumpeting the victory of the doves and what's going to happen moving forward as if he was still relevant, if he was, then why wasn't he writing last week that Summers was going to be a no go in the WSJ- that's a pretty big story?

So Index Futures gapped up on the open of futures trade for the new week, also in a "TAPER OFF" way, the gold (flight to safety trade) just reversed correlation again and became the "Doves are running the F_E_D" as it gapped up with Silver.

 Gold Futures 1 min up on the Summers story, but losing a bit of the luster on an intraday 1 min 3C negative divergence.

The Gold 5 min chart has a positive divergence, however looks a bit to me like this may  form a "W" base before it makes any really significant gains, that could be done by Wednesday's F_O_M_C policy statement which will be the event of the week as September was top contender for a QE taper. The chart looks to me like Gold will come back down to the white trendline with a strong base, or stronger base for an upside move.

Silver looks almost EXACTLY the same on both timeframes. So Gold isn't a flight to safety trade anymore, or at least not tonight, it's a "TAPER-OFF" trade, a 180 degree flip flop.

Also seeing Taper-off reaction on the open of futures, Treasuries are acting very much like the Doves will retain the steering wheel, at least that's the way the market has taken the Summers bail out (not the typical F_E_D bailout-out either).

None of the Carry pairs look particularly strong as the new week opens, of course a USD/JPY move is possible with the $USD looking the best of the 3 potential carry crosses. The $AUD and Euro both gapped higher, but they don't look like they can hold that gap for too long, at least with the early data we have so far.

Here's a look at Nikkei 225 Futures...

They came down on a 1 min 3C negative divergence, but I have to say the 5 and 15 min charts for the Nikkei look pretty good so until we get more data, I wouldn't count the Nikkei out on a pullback off opening trade.

That leaves us with US Index futures: SPX, NASDAQ 100 and R2K which are all over the place as far as underlying trade goes, this may be some hold-overs from last week's activities that just haven't had enough time to catch up or this may be real, we'll know more as we get more data, probably tomorrow morning, although 5 min charts will probably need regular hours trade to really make a convincing case, here's ES tonight on the HAWK is out, long live the Doves market sentiment.

While this 1 min negative divergence looks strong, it's still a 1 min chart and I don't find them all that useful for overnight action, but this far it's held ES/SPX futures off from making a new high since trade opened for the new week. As mentioned, it's too early and volume is too light in the overnight session to take much away from the 5 min charts, but as it stands...

ES/SPX 5 min have a negative divergence, this is probably a hold over from last week until we get more data on that longer timeframe, but it may be something, it will definitely be near the top of my watchlist to see if the Summer's reaction is KNEE JERK ONLY.

NQ/NASDAQ 100 Futures one and 5 min are in line with the 5 min looking definitely better than ES's 5 min.

TF/Russell 2000 Futures 1 min is scribble, it's not telling us anything, but this is by far the clearest negative of the 3 index futures on the 5 min chart.

R2K Futures 5 min chart, clearly and by far the most negative of all the index futures, as you can see a lot of that is from late last week, but there's no attempt to confirm tonight's gap up.

So at this point we have the NASDAQ looking pretty decent, the SPX futures middle of the road leaning negative and the R2K futures clearly negative.

As I said, it's hard to say if this is a knee jerk reaction (as I mentioned earlier, even Doves on the F_O_M_C now are leaning toward ending QE, so I'm not sure how much weight the Summers story carries).

We'll simply have to give the futures more time for the 5 min charts to catch up and that really needs to happen during regular hours when there's some volume to have credibility.

I'll say the FRP position/trade idea put out tonight looks like a perfect set up if the futures hold up through the night. There are probably well over 100 others that are in similar circumstances, which is why I thought the market needed some help (accumulation) for an upside move because all of these "Almost" perfect short set ups are in need of a bump just above resistance to varying degrees, PCLN is not far from resistance at 8/9, NFLX has a much nicer, bigger set up with resistance back at 2001, that's a juicy one so there are numerous great looking set ups that all can come to us that just need a little help on the upside just like FRP which is really the CORE SHORT concept behind the entire last 3 weeks or so.

I would definitely encourage you to watch the FRP video until the concept sticks because that is the trade plan, the "Core short market gift" I have been talking about and it can be applied to PCLN, NFLX (in very different timeframes and very different trades- for instance the NFLX double top is much longer and thus, makes that a much higher probability position that would be an absolute gift if it played out like FRP). When watching the video, forget about FRP, it's the concept of the trade set up that can work for literally well over a 100 great looking, solid positions in good names with good volume.

See ya in a few hours.

See you in a few hours...