MORE FED Up and Walking Back by FED Speakers

When the F_E_D's own unofficial WSJ plant/mouthpiece criticizes not the F_E_D's decision, but their communication (as it was 180 degrees out of the blue), then you know they REALLY screwed up and bond traders are definitely not going to trust them which is an unintended consequence of immeasurable proportions in the future, or there's more to this story than meets the eye which was my initial thinking.

Hilsenrath writes today:

"Federal Reserve officials created new uncertainty about how much farther they will push their easy-money policies—and new questions about how effective they are at communicating their thinking—with the decision to stand pat on the pace of their bond purchases for now. 

The Fed on Wednesday went beyond merely deciding to keep buying the $85 billion a month of mortgage-backed securities and U.S. Treasurys that it had been telegraphing for months it might start winding down. In the news conference after a two-day policy meeting, Fed Chairman Ben Bernanke also seemed to walk away from some of the guidance he had given in June on how the bond-buying program would play out over the next year, making it even less clear when the program will end."
------------------------------------
As I posted in the Pre-Market Update, Bullard had come out with some very non-chalante wording about the F_E_D's decision, said that October is a possibility which contradicts the "Over the next several months" language from Wednesday's statement that replaced the "imminent" statement previously (regarding F_E_D actions could add to or take away from QE at any time, the "OVer the coming months" languauge is something I was quick to notice Wednesday, the market was quick to notice it as that is where our first significant negative divegrence came in to play (you'd think the opposite) and I wrote at length about this Wednesday and ever since as it gave what will probably again be Bernie's "Plausible Deniability" that he's getting so good at, like his own version of "Green-speak".

It seems Bullard's comments, which were along the lines of, "what's $10bn in the taper, a drop in the bucket" as well as the October talk.

So far as we saw in an earlier GLD/SLV/GDX update, we sold the GLD/GDX calls at the perfect time, the green NUGT long has been hurt, but still remains profitable and I'm sticking with earlier analysis on that one for now.

Gold and Silver acting very "Taper On" with significant declines today

 Gold's positive divergence as I showed earlier including the head fake move right in to the F_O_M_C where we took profits on GLD/GDX calls, perfect timing too.

Today, even on a 15 min chart with the decline, 3C is STILL leading negative.

The same with Silver Futures on a 15 min chart, it's not just the amount lost since the Bullard comments, it's that a timeframe as long as 15 min intraday is still leading negative instead of just in line or even lagging!

On the other-side of the "Taper On" & "Taper Off" reaction in QE sensitive assets...

Treasury futures look a bit different to me after yesterday's retrace, the 30 min 3C chart is actually showing a marginally positive divergence and as usual, the longer 30 year looks WAY better and is showing a CLEAR positive divegrence. I'll be updating TLT, I did see some interesting things earlier that I wanted to post and you know how I feel about the position, although I can't tell you why exactly (I do have some guesses that I'll keep to myself until I have objective data to back them up).

You've seen the $USDX (futures) positive divergence, well guess what, I'm losing it,it is already negative and has migrated to a 15 min chart. Watch for $USD downside, remember your correlations between the $USD and risk assets and remember where I said I'd put alerts in the PM's.

I mentioned today's main event was a bevy of F_E_D speakers, you know what I think about the F_E_D/FOMC action and what I think it does to confidence is crucial areas like the bond market, well Esther George spoke and said the F_E_D's CREDIBILITY IS NOW AT RISK! Sound familiar?

George said the F_E_D (this is a F_E_D member, granted one of the hawks) created a disconnect and market confusion.

We still have Federal Reserve Gov. Daniel Tarullo who is speaking now, St. Louis Federal Reserve Bank President James Bullard at 12:45 (all F_O_M_C voting members) and Minneapolis Federal Reserve Bank President Narayana Kocherlakota  at 1:45.

With other risk assets acting the way they are and the $USD, besides Gold and Silver, I think it's a decent probability that the scenario I laid out last night is still very much in play.

We'll see what the 3C signals say and if they concur with T's and $USDs.