Daily Wrap

I'll keep it short tonight, but VERY on point with one of the most important charts of the last week, perhaps of the year, perhaps even longer.

I think the event of the day, perhaps even the event of the year (although contrasting it with last week's F_O_M_C and Yellen's press conference is difficult to reconcile), must be this morning's rebuke of the market by a normally "Dovish" James Bullard, the President of the Federal Reserve Bank of St. Louis.

Some bullet points from Bullard this morning...

• BULLARD SAYS MARKETS DON'T APPRECIATE HOW CLOSE FED IS TO GOALS
• BULLARD SAYS HE'S TRYING TO PUT EMPHASIS ON CLOSENESS TO GOALS
• BULLARD: MARKETS SHOULD BE PRICING IN RATE INCREASES BASED ON WHAT THE FED SAYS
•  BULLARD: ECONOMY SHOULD BE ABLE TO HANDLE IT IF WE BEGIN TO PULL BACK FROM WHERE MONETARY POLICY IS NOW

A President of a Federal Res. Bank who is known for leaning on the "Dovish / accommodative side", doesn't likely go out and flat out tell the market that it's wrong without the ok of higher ups and there's only one higher up and she's a she. One has to wonder why send out a dove to bring news like this? You'd normally expect this to come from one of the hawks, my guess is "credibility" as a moderate dove.

Bullard told Fox Business news, 

Fed Could Hike Rates in 1Q 2015

And guess why?

"Inflation is moving in the right direction toward the central bank’s 2% target, St. Louis Federal Reserve President James Bullard said Thursday, perhaps prompting an interest rate hike as early the first quarter of 2015.

When that happens, it will require a delicate balancing act by the central bank to keep inflation in check, using rising interest rates to keep prices stable, Bullard said in an exclusive interview with FOX Business Network's Maria Bartiromo on Opening Bell."

This is exactly what I have been saying, the one thing that would FORCE the F_E_D's hand, INFLATION which is not noise, it's a trend.

Earlier today I emphasized that although we want the best entries and exits and watching intraday trade often gives us that, we don't want to get lost in the lines, miss the forest for the trees and that's why I put up this post showing where we really are in predictive price patterns...The Bigger Picture

In that spirit, as we have seen the F_O_M_C knee jerk reaction come and go, there's only 1 chart I feel is VERY important to share with you tonight, that would be the following...

This is the SPX (red/green) vs. 10-year Yields (white) since the F_O_M_C. Remember how many times over the last week I said the rather benign policy statement seems to have kick-started fear with smart money? We've seen it every day whether moves in VIX, moves in 3C, relative strength in Defensive S&P sectors such as Utilities (see last night's EOD post), moves in inflationary hedge assets such as Gold and Silver.

If you look at the chart above showing the direction of 10 year yields since the F_O_M_C on the 18th, all you need to understand how significant this chart is and what it means to the market is this post from a week ago, 10-Year Yield (Bemchmark) vs. the Market. 

Look specifically at the charts comparing 2007, 2009, 2011 and right now and then take one more look at the trend in 10-year rates above since the F_O_M_C and CPI released just before, it should be resoundingly clear, especially in light of posts like today's The Bigger Picture.