Early Indications

I have to be careful with which assets I look at short term on short term charts because the missing NYSE data from yesterday obviously was not able to be replaced, from what I understand even within dark pools some orders were filled with 1 hour old quotes so filling in the gaps would probably be just as useless as the empty gaps which skew an indicator until they're averaged out, of course this shouldn't take too long considering the amount of time the market was down s. the length of the indicators.

One thing I want t be very careful with is early assumptions. I know the cynical view that is well deserved in this market is that the F_E_D handed the QE baton off to the BOJ, however when you think about the repeat of 2 week old news yesterday by the Nikkei, you have to consider the fact that Japan's Pension Fund (GPIF) in addition to raising stock allocation from 12% to 25% is also cutting sovereign Japanese bond exposure from 60% to 35% and as mentioned, over the last year, this has become one of the most illiquid major bond markets which has seen consecutive days pass without a SINGLE trade, what do you think happens when hundreds of billions of JGB's are dumped in to such an illiquid market? The amount may be even more than that, the point being, the vote was close in the BOJ, 5 to 4, it's not something I think anyone could have predicted, but it also doesn't necessarily mean that the F_E_D and BOJ were in collusion, in fact, the move sends the Yen down and the $USDX higher which was one of the F_E_D's biggest concerns in the minutes from the September meeting, they were VERY concerned that $USD strength would stagnate global growth and within days you started hearing noises from F_E_D regional presidents that a new QE could be introduced or QE3 could be extended which was NEVER mentioned before the minutes came out which I said at the time was more likely than anything to be the F_E_D trying to jawbone the $USD lower which worked.

The BOJ expanding QE and decimating the Yen even further raises the value of the $USD, so this may NOT be a move that the F_E_D is happy with, much less planned.

Beyond that, the dumping of so many JGBs by the GPIF in to a bid-less market may have warranted and been the reason the already monstrously sized QE program added to its size, to absorb those JGBs from the GPIF.

My main point is the same EXACT thing I said on Wednesday, September 19th 2012 when the F_E_D introduced QE3, "Even though part of me wants to cover every short position I have right now, this is the time to gather data and be patient, not make an emotional knee jerk move", which interestingly and defying common sense, was right on as this is what happened...

F_O_M_C introduces QE 3 at 2 p.m. September 19th 2012, the initial knee jerk reaction is higher and in to the close, in to negative divergences and the next day the market topped out, went sideways for about a month and lost -8%, NOT the QE3 reaction you'd expect.

In any case, again, I have to be careful short term which assets I look at and you as well as there's a skip in the record from yesterday. Interestingly a German market broke down overnight as well.

So far this is the early indications from reliable data without missing data...

 Early QQQ charts which have no missing data are not confirming the gap up, nor are SPY, DIA or IWM, but the last 3 all have missing data.

The 5 min NQ chart is also not confirming, it has had plenty of time overnight to move to confirmation.

All of the Index futures just have sloppy intraday charts that don't have any trend.

ES 1 min.

I looked at the overnight charts and none showed any foreknowledge of a leak or indication of what was to come, but that's not too surprising given the BOJ's vote was so close, 5 to 4 in favor of expanding QE.

 The NYSE intraday TICK (you see missing data to the left) saw an early trend up on the open, likely orders being filled from pre-market, then a dip below the channel which has turned in to a sloppy sideways trend below early channel highs and tightening quickly (meaning the intraday breadth swings are getting smaller (now at +500/-300).

Interestingly, and definitively answering the question as to how much VIX futures accumulation was pre-F_O_M_C hedging, the 60 min leading positive on VIX futures which I try to give some visual representation below with white boxes of how meaningful or big each divergence was (the relative positive early which we noticed earlier in the week being a smaller divegrence and smaller underlying flow and the leading positive being much higher underlying flow)  has now moved to a new leading high, I was watching as it happened.

 The closer 7 min chart also shows a sharp leading positive divegrence and pick up in VIX futures 3C leading positive signal. Again, it seems someone with deep pockets is concerned about something.

The $USDX on the other hand had been showing a negative divegrence before the F_E_D policy announcement, however the immediate dip of the Euro on seeming expectations that Europe would pick up QE, sent the $USD immediately higher on the Euro weakness, the negative divegrence is still there.

Overnight Goldman Sachs put out a piece saying European QE has been FULLY priced in to the market, but in their view it was neither imminent as the Euro reaction suggested or LIKELY that it will ever manifest, as noted before it would cause something akin to a constitutional crisis which would need to have the ECB's charter completely revised, which would be like Congress revising the F_E_D's charter which gives them authority to print and a dual mandate and that alone, maximum employment and price stability.

Today is an op-ex day, only a weekly so I doubt it gets pinned, although who knows, there's a lot of premium out there that can be easily lost.

It's time to gather hard data rather than jump to conclusions. Remember, as pointed out this week, EVEN AFTER the face ripping rally, the Percentage of ALL NYSE stocks trading above their 200-day moving average was still less than half and the Percentage of ALL NYSE Stocks Trading ABOVE their 40-Day moving average was just above half, in past rallies and we haven't seen one this strong this year, the rally has driven the last metric (stocks above their 40-day) to the high 80% area so being just above half shows there's still a massive breadth problem in the stock market or if looked at as a market of stocks, it's a very different view than what the averages depict, but that's another story as one Dow stock alone, Visa, was responsible for 145 of the Dow's 220 point advance.