A.M. Observations

Good morning,

Futures were lifted slowly a bit overnight, but it hasn't translated in to anything significant just before the open, ES looks like this, it will of course look very different at the open as always.

There has been a small negative divergence at this week's highs in premarket.

Today's main event of course is the F_O_M_C, as always, "Beware the F_O_M_C Knee Jerk Effect",  we've seen it too many times, we know that it usually lasts a day or two (but with a monthly op-ex pin tomorrow who knows) and then it tends to reverse.

Also remember the asset in control of the market and has been since last week (thus the reason we cleaned house and took profits on Puts Friday and entered a couple of hedging calls) is HYG, there was deterioration yesterday, but until the 5 min chart shows distribution I'm not getting aggressive on anything timing wise.

Look for Yellen to try to make her stamp, I think guidance on the F_E_D funds rate (presently 6.5% unemployment for a rate hike) will be the main event. The F_E_D may have to make the economy look worse than it is, although that's a feat, but they'll likely be looking to push off rate hikes , I would think , however the last minutes did reveal that rate hikes were being considered as early as mid 2014 which is almost here, this is what the market is worried about more than anything, rate hikes are market killers. I'll be out of radio contact at 2 pm on the announcement.


OTHER THAN THAT, I'D URGE YOU TO STAY PATIENT, WE KNOW THAT VIX FUTURES NEED TO BE ACCUMULATED AS THEY HAVE BEEN SINCE MONDAY AND PUT IN A REVERSAL PROCESS, JUST AS IMPORTANTLY THE MANIPULATION LEVER OF HYG NEEDS TO SEE THAT 10 MIN POSITIVE DIVEGRENCE UNWIND, UNTIL THEN I'D TRY TO BE AS PATIENT AS POSSIBLE, UNDERSTAND THIS TOO SHALL PASS AS WE JUST CLOSED PUTS FRIDAY WITH TRIPLE DIGIT GAINS. 

It never feels the same though when you're in the eye of the storm.

One other thing, besides the Ukraine which is seeing more tension with Russia planning air strike exercises on the border, Chine is in big trouble, WATCH COMMODITY PRICES, commods are what have been used to secure bank loans through mining companies and the likes, an unwind as we have been seeing in copper and iron ore hitting other commodities proves there are cash calls on these loans, expect more defaults and commodity prices will reflect how bad the situation in China is, I have called it "China's Bear Stearns circa 2008 moment", I still think that so we really need to find a play that's set up on China (short).

Now, off to work! Have a great day.