Mini Wrap

It's hard to believe that when I was drinking my coffee this morning, the prediction made last night in the Daily Wrap, that it was likely the market would open lower today was not only true, but by about 10 ES points from the 4 p.m. Tuesday print, that's a pretty substantial decline.

Then it didn't take long for positive divergences to start showing up in HY Credit (used for arbitrage manipulation or as an institutional risk asset) and distribution in VIX futures which put together create the market supportive SPY Arbitrage and I wasn't the only one to notice, a couple of members who are good with 3C saw the same.

In fact, it seemed that from looking at when the divergences started and considering how bleak they were yesterday, it looked probable that the ECB interview (European Central Bank) published in the Wall St. Journal today was almost certainly leaked or otherwise known of in advance.

While the ECB tried to knock down the Euro with last week's SURPRISE 25 basis point rate cut, it didn't last long, although the initial move was worth a couple hundred pips. Suddenly the ECB finally went where the ECB never went before and mentioned something that apparently is AGAINT their charter, "Asset Purchases". The ECB is prohibited from financing and E?U government, but when buying bonds, they are doing exactly that. In any case the QE statement from the ECB was market moving and ES which was down 10 points before the close, closed 19 points higher from intraday lows to highs.

The initial goal of the ECB was met, they jaw-boned down the Euro and raised the $USD without making a single move, just talk...

 The $USD rises on the WSJ ECB QE article and then the $USD gives up those gains much to the disappointment of the ECB, what a miserable failure! This is the second failure because their surprise 25 basis point cut only had a knee-jerk response before the Euro lifted again.

The legal ability for the ECB yo intervene in this way is highly suspect, this is why we haven't heard of it as a possibility until now.

Some very smart people thought that the F_E_D may be getting ready to taper, while the ECB steps in with the liquidity spigot. However, an early release on Janet Yellen's comments for the Senate Confirmation hearing tomorrow (leaked early again?)  sent the $USD in Taper _off and QE on mode, unlike the last week and after the NFP!

The Euro dropped as the ECB hoped as the WSJ article hit the wires, but had a half life of just about, (um, carry the 6, move the decimal point, divide by two, uh...) Half life of almost NOTHING sent the Euro higher.

After market, Yellen's early , pre-released comments sent the Euro even higher, Draghi will have a hard time out-jawboning the F_E_D.

As a result, gold which we were already expecting a bounce in, bot an extra bounce from Yellen's pre-released comments.

 Gold ran up all day, but as of yesterday and actually earlier, we've been expecting a bounce in GLD and that's why the GLD December calls were just added to.

30 year treasury futures ran on the Yellen news

And 10-year treasury futures ran on the Yellen released comments, with the $USDX down ALL QE SENSITIVE ASSETS ARE ACTING AS IF IT'S TAPER OFF/QE ON.

However, slow down before jumping to conclusions... there's more.

First though, here's a summary or bullet points of Yellen's prepared remarks-she's not dressing up as a hawk as a dove underneath.

-"supporting the recovery today is the surest path to returning to a more normal approach to monetary policy"

- "A strong recovery will ultimately enable the Fed to reduce ... reliance on unconventional policy tools such as asset purchases"

-"have strongly supported this commitment to openness and transparency, and will continue to do so"

- " I am committed to using the Fed's supervisory and regulatory role to reduce the threat of another financial crisis"

- I believe the Federal Reserve has made significant progress toward its goals but has more work to do

For good reason, this was taken as universally dovish, however has anyone really expected anything other than that from Yellen? Could we be in a buy the rumor / Sell the news situation?

I don't know, but I'm hard pressed to explain this after the Yellen release.

 The ES 1 min negative leading divergence was the worst and developed fast, it's well below the area when ES was down 10 points this morning. Since it's new, it won't have made it to the 5 min chart, but I'll be looking at that later.

NQ futures were just behind

And TF is borderline, but ES is pretty darn clear as is NQ. THIS LOOKS LIKE CLASSIC "BUY THE RUMOR/SELL THE NEWS", too bad we don't have more market's and tools available to us.

The 30 year Treasury futures are in there too.

 After being in line all day, suddenly on the pop on Yellen there's a negative divegrence?

And the Euro that popped on Yellen, maybe Draghi gets the last laugh?

I won't pretend I know what all of this portends except I know what deeply established trends show and this is the exact reason I took the time to try to anchor expectations of the market with this chart...

 The point was the 2 month rally in the middle of a turbulent market and then a downtrend following it with 21 down days and 20 up days. The link can be found here for the complete picture.

So I'll look and see if regular hours had any surprises that didn't belong there (PRE_YELLEN) and then see what happens with futures tonight, but the ES and NQ charts are not normal and I have the strangest true feeling of Deja-Vu.