A.M. Observations

Today's the day I dread, the day I have to turn on CNBC and listen for a bit as the F_O_M_C is scheduled for 2 p.m. and almost always comes in on schedule, but it doesn't have to, it could come earlier or later, this is literally the only time I turn on CNBC and in the short time of listening, I'm always reminded of why I don't turn on CNBC.

While the Chinese interbank liquidity, money markets, and bond rates are all screaming like petulant children right now (things are not great right now), I don't think it's worth spending too much time on until after we hear what the F_O_M_C has to say, after that China may be VERY material.

I know you have to be sick of hearing it and just by saying that you already know what I'm going to say, but it's my job to encourage you to stay calm as the market goes nuts after the policy announcement and not to get too tied in to whatever extreme the market moves to, as always, "Beware the F_E_D / F_O_M_C Knee-Jerk Effect", it's almost always wrong and reversed within days or even hours. That's of course on tap for 2 p.m.

I'll be exceptionally busy today thumbing through every asset class I have access to looking for anything unusual so if I'm a little more quiet today, I'm not on vacation, I'm working harder, that also means email response times will likely be slow, if you have a really important email, please mark the subject line with "URGENT" and please be sure it is urgent if you mark it that way.

ES opened 3 points above yesterday's 4 p.m. print, it has been following the remarkable JPY correlation, whichever carry trade is working at the moment and overnight that was EUR/JPY as it normally is...

 This is a 1 min overnight chart of EUR/JPY in candlesticks (red/green) and ES futures in purple, note the remarkable correlation? It has been this way essentially since November 16th 2012 which was the bottom of the pullback from the September 13th F_O_M_C QE3 announcement which saw the market take off like a rocket right after the announcement until the press conference when at 2:24 p.m. Bernie was asked what would happen if (paraphrasing here), inflation (on commodities) rose with QE and started causing another corporate margin squeeze (again paraphrasing and some inference) and for the first time I can recall the F_E_D head introduced some subjectivity or real life and said that they could dial back purchases, the market topped right then and there for the day, still high, but that was the top.

The next day there was no follow through and the market drifted -8% lower in to the super cycle off November 16th lows. While the market was heading down though, there was accumulation in the market , but first they leveraged up with the carry trades, both were ready by mid-November, these things don't happen overnight or by coincidence as CNBC gives you a reason every day why the market did what it did.

Looking at the EUR/JPY,...

It looks like some softness is making its way in to the pair, it's not a strong divergence, but it may be enough to keep the pair lateral. The individual single currency futures showed what looked like the EUR a little soft and the Yen looks like it is setting up to bounce off the lows from yesterday through today, I don't know about exact timing, but there's a positive divegrence there so I'd expect that which would pressure the pair lower even more.

The $USDX also looks like it will see some weakness within the next day, of course that can change dramatically at 2 p.m. today.

The Nikkei 225 futures also look a bit toppy off this last to the week's highs.

I wanted to let the market open and confirm as gold futures looked a little ambiguous, silver futures very ambiguous, but I'm guessing with a weaker $USD they'll jiggle a bit as the short trend expected to see a pullback over the next several days/week. I'll take a closer look at GLD as a.m. trade burns off a bit.

Ultimately I still feel good about a strong bounce in oil as mentioned last night and the last week.

I'm going to make some a.m. rounds through the watchlists and see if anything is standing out. Right now ES is NOT tracking a bounce in EUR/JPY which is not normal, it may be the games of a.m. trade, otherwise it looks more than a bit odd, imagine the FX pair moving up and ES down vs what you see above.