To sum up today, we had a F_E_D Hawk saying essentially the political system is going to make it difficult for the F_E_D to taper, which is an interesting conundrum for those of us who have ever been in a co-dependent situation, the word, "enabler" should be familiar. When the F_E_D did a 180 in September the question I asked repeatedly was, "What are they so afraid of?" Apparently we now know the answer to that, the unwinding process is very painful, just a simple interest rate unwind did in bubbles like the Tech boom, imagine the 4 trillion in extraordinary measures on top of that and that happening at the same time the D.C. debacle was going on, I don't think the market's circuit breakers could keep up. However one has to wonder (based on former governor Warsh's comments that entering accommodative policy is easy, exiting policy is a nightmare) just how much of that fear is based on the process itself, as I said, simple interest rate changes or what actually is "The business cycle" creates bull and bear markets, unwinding what is as of today, $3.8 trillion in on the balance sheet that took nearly 5 years to put together, now that's a feat that's never been tried before, I doubt it's ever even been contemplated or modeled until the last year or so. Fear indeed. Speaking of which, the F_O_M_C will be back Oct. 30th.
After Fisher we had a gap fill and a clear low volume short squeeze as short squeezes often are and then just some killer earnings from GOOG and CMG. I hear a lot of people talking about S&P targets, you know that I suspected we'd get a strong move to the upside before we even had the 3C signals for it and that was based on (you'll remember these words I'm sure), "Hundreds of shorts on my watchlist that are ALMOST there, but just need that little extra boost". I've been using NFLX as an example, tonight I showed DE in depth as a trade set up and example. If the market doesn't first turn to, "He who sells first, sells best" in an AAPL like scenario, then
I don't think the question is what is the S&P target, I think the question is, what does it take to get these shorts in position? NFLX came very close today, you may think I'm crazy, but I was wondering how GOOG would make it above its clearly defined range, earnings took care of that tonight.
SHORT GOOG? AFTER THOSE EARNINGS? You might ask... Earnings are about what you did, the market is about forward expectations, sometimes killer earnings are a curse if the market doesn't think the company can do better next quarter and consumers, well they aren't in that great a shape. Don't worry, I wouldn't short GOOG without good reason, but it was one on the watchlist and one in which I was wondering, "How will it get above the range?"
Again, I don't think the question is about how high the market goes or what the target is, I think it's much more utilitarian than that, Wall St. does things for a reason, you know what I've thought the reason for this move to be before it got started.
As for futures, prices are up nicely, I'm just wondering how the divergences will play out. The divergences make perfect sense with where price is, think about the reason I expected a strong move, if we didn't have distribution in to it, well then I'd have been totally wrong about the reason for the move.
That statement is a bit arbitrary, at least for now, but perhaps in looking back it will be answered more objectively. Speaking of objective, the charts are all we have and there are some interesting developments.
*I'm using ES only because all of the Index futures look virtually the same, TF may be a little worse and NQ a little better, not much though.
The divergences started earlier and migrated from 5 to 15 and 30 min charts and reached 60 min charts now which is a heavy dose, a strong divegrence. Again it's like the chest with the promise of something inside and the migration of divergences through the short timeframes like 1 min, 5 min, etc. form the key or timing.
The 1 min divegrence has stayed in place all day and all night, this is not usual behavior for the 1 min which is usually calling 4-6 hour cycles, we have seen this before and named it I believe a persistent divergence, that was about the time we had that very nice head fake short on BIDU so it's been a while since I've seen this.
That has migrated to the 5 min chart and not just migrated, but 3C has taken a sharp leading negative downturn, so naturally I'm quite interested in seeing how this unfolds, it seems to be moving at a rapid pace, although I've learned and relearned and will relearn again that however long you think is reasonable or however far you think is reasonable, double or triple that estimate.
Speaking of reasonable, Institutional money is not following this move in stocks, they apparently don't believe it is reasonable. This was last night at -20 points.
Tonight we are at -45 points. I recall an ES model (CONTEXT) that was something like -44 points or so, then ES pulled back to something like 39 points, it was amazingly accurate so long as they don't have to make some adjustment for a carry trade, but looking at the Index futures 3C charts, I'm guessing this won't be revised.
We'll see what things look like in the morning.
As far as opportunities, I don't think it will be a flood gate all at once, I think there will probably be some that are ready tomorrow and some that are ready next week, I also think there will be some good long plays like URRE and MCP looks like it's not too far away from a move to the upside.
I'll see you in a few hours.
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