Morning Update

There's a lot to cover in the macro economic sense this morning.

Asia was mixed with the Shangahai +.76, the Hang Seng -.49 and the Nikkei +.67%.

Europe opened green on a batch of strong earnings, but soon turned risk off and sharply about an hour in to the session...

Whether the F_E_D or their own data or a combination, the decline looks like very low liquidity.

Italian and Greek banks were some of the hardest hit as the EBA, "European Banking Authority" warned banks, "Banks should not feel too secure" after the ECB stress tests, even the ones that passed. 

Ironically the biggest stressor of the European banking system, outright deflation, which the ECB conveniently did not test for (oh.. forbid more than 25 banks fail, this is after all a confidence boosting exercise) got the shock the ECB didn't want to test for when GERMAN October Regional CPI came in negative almost across the board, nearly every region is now in outright deflation, not heading that way.

The strong USD continues thus far, impacting global fixed income markets with Denmark and Japan issuing bills for the first time with a negative yield. Commodities were also effected, especially silver.

Then came Initial Claims this morning which saw a modest 3k rise, however continuing claims, despite their 4 week moving average being at the second lowest in 40 years, saw a jump of 33k to 2.384 million, with the biggest miss since August telling us one thing about Initial Claims, you don't get much firing when you have no hiring.

Following that Q3 GDP came in above consensus of 3.0 at 3.54% which sent risk assets higher...

Risk assets pop back to yesterday's F_O_M_C area on GDP print.

However the devil is always in the details. Taking a closer look at the data Personal Consumption fell from Q2's +2.5% to 1.8% in Q3, below consensus of 1.9% and contributing 1.22% to the 3.54% GDP print. 

Inventories were expected to give GDP a boost, after all, the ISM's! However Inventories fell -5.7% 

Net Trade was up from Q2 -0.34% to +1.32% as imports reversed, the import decline is another sign of a sharp slowdown in US consumer demand which is the same reason inventories were down. Again, what were all of those PMI's looking at if domestic industry not only stagnated, but reversed down from Q2?

What was the silver lining? This is where it gets scary for future GDP as the savior of GDP was government spending, specifically national defense spending. Government spending accounted for a +.83% boost to GDP, the highest since Q2 of 2009! However, remember that net Treasury issuance is falling because of the infighting in Congress and running smaller deficits, government spending won't be able to save GDP long unless... Well unless we expect war.

The F_E_D has GDP yesterday so is Yellen betting on global conflict because the take on the F_O_M_C was a very , almost arrogant confidence. The take on the F_O_M_C was overall a hawkish tone, very confident and very comfortable withdrawing liquidity from the market.

As I said Tuesday, I'd be most comfortable with price in the averages siting above their important moving averages for a few more days and putting in a larger reversal process, leting retail buy and create a bigger bull trap than what's already there.

Yesterday's market was exceptionally dull and even more so for a F_O_M_C day, but last time I said we had a dull market and warned against getting complacent, we put in the bottom the next day that led t this move higher through the second half of October so we'll be on our toes. I'm still looking to add a little bit and of course will point out any interesting looking opportunities above and beyond the ones we have already picked up as well as new opportunities in any of those assets. 

The word of the day... same as just before the rally started...PATIENCE