What surprised me is that we didn't get a knee jerk reaction 1) because we almost always get one on any F_E_D based release and 2) more specifically as a relief bounce that the minutes "WEREN'T" more hawkish.
However comb over the minutes and you might have a good reason for the SPX Futures failing to follow USD/JPY higher post minutes where the USD/JPY took out the $118 level.
Note USD/JPY easily takes out $118 whereas $117 was suspected resistance for the near future.
Below you'll see USD/JPY in red/green candlesticks vs. ES / SPX futures in purple on a longer 7 min chart just to show 2 things...
You can see how traders might start selling longs and moving to shorts, thus head fake moves lock them in, keep them happy that the market is fine and creates demand on their part via limit /breakout buy orders which are easy to sell/distribute in to which we saw clearly yesterday and today.
However today, ES could have easily followed the USD/JPY north on a "Thank goodness the minutes weren't more hawkish" relief bounce, but...
So what might be responsible for a risk off posture? The market clearly not willing to chase risk which it has been connected to at the hip via the USD/JPY? Because my personal portfolio that is almost completely short except for an MCP long was up in totality +1.7%, that's a pretty stiff move considering it's total portfolio and not a single position and considering today's market with the Russell 2000 the worst performer @ -1.10% and the Dow nearly unchanged at -0.03%, the SPX close to unchanged as -0.17% and the NASDAQ squarely in the middle @ -.47%
I mention the above not out of pride or anything like that, I mention it because considering today's market performance which I'd call mediocre between all of the averages , averaged together, that's a fairly large amount to move an entire portfolio on such a day.
Off the cuff the minutes sounded a lot like some near term inflation expectations running below consensus and wiggling around trying to figure out how to communicate rate hikes and consolidate individual opinion (the DOTS-individual interest rate expectations os committee members at various time intervals) and some mention of the volatility policy normalization (which has already started) will cause in the stock market.
Remember my recent post, The Plunge Protection and Market Correction Team ? In a nutshell, the point was that as we had strong data showing the market was likely to decline (smart money has to be in place as that is a large part of our signals, their actions), Bullard put out a hawkish comment that appeared at least to be the catalyst for the move down. Then as we had charts and data suggesting a strong move up BEFORE the last F_O_M_C meeting at the October lows, Bullard makes a very dovish comment about "Not ending QE" BEFORE the F_O_M_C meeting , seemingly the catalyst for the move up, if only we hadn't already had the proof in hand that such a move was coming. Finally as the market has made this face ripping rally as projected in mid October, Bullard once again becomes the Hawk in an apparent attempt t send the market down as we once again have overwhelming chart evidence that smart money is positioned for a substantial fall.
In other words, while it seems that Bullard himself is causing these moves, we know better just from a strategic point of view as institutional money can't put a position together in a day , the positions were already in place, but perhaps Bullard is giving these positions and moves a kick start of momentum or at least cover to "explain why the market did what it did", something people must know in a 30 second soundbite.
Considering the F_O_M_C was AFTER not one, but TWO Bullard "seeming" market moving comments, the F_O_M_C adds this to their conversation contained within today's minutes...
"(F_O_M_C) members considered the advantages and disadvantages of adding language to the statement to acknowledge recent developments in financial markets. On the one hand, including a reference would show that the Committee was monitoring financial developments while also providing an opportunity to note that financial conditions remained highly supportive of growth. On the other hand, including a reference risked the possibility of suggesting greater concern on the part of the Committee than was actually the case, perhaps leading to the misimpression that monetary policy was likely to respond to increases in volatility. In the end, the Committee decided not to include such a reference."
The bold section suggests that market "volatility" (remember the VIX, thus volatility rise on a market decline) will NOT be met by F_E_D actions to interfere in the market which is in the bold sentence,
" including a reference (to stock market action) risked the possibility of suggesting greater concern on the part of the Committee than was actually the case, perhaps leading to the misimpression that monetary policy was likely to respond to increases in volatility."
Also with regard to stock valuations and underwriting standards, the F_O_M_C expressed "CONCERN"...
"The staff report also pointed to asset valuation pressures that were broadening, as well as a loosening of underwriting standards in the speculative corporate debt and CRE markets; it noted the need to closely monitor these developments going forward."
Had these statements appeared without any verbal market moving words by Bullard (you can see them in a chart in this post, The Plunge Protection and Market Correction Team) before the F_O_M_C, they likely would have slid under the radar or caused some questions, but since Bullard's comments and the "apparent" market response (I say apparent because we know smart money was already positioned before the comments were made and the comments came as a sort of spark to the move smart money had already prepared for) were BEFORE the F_O_M_C meeting, it seems highly likely that this was an attempt to directly address the issue and warn the market THAT THE F_E_D WOULD NOT CHANGE POLICY RELATIVE TO ANY DOWNTURNS (INCREASING VOLATILITY) IN THE MARKET , as well as noting that policy normalization would cause market volatility!
As The WSJ's Jon Hilsenrath (unofficial F_E_D spokesman) printed, "Some participants pointed out that, despite the market volatility, financial conditions remained highly accommodative and that further pockets of turbulence were likely to arise as the start of policy normalization approached,”
"Volatility" is synonymous with market declines.
If we're wearing our tinfoil hats which has so many times in the past proved to be a reasonable and correct theory, one has to wonder if the F_E_D minutes were leaked, if they are not routinely leaked as they were blatantly in 2013 and if that may be the reason why yesterday's apparent head fake move was run after 5-days days of a 3 point SPX closing range, the narrowest closing range in the history of the market. It just seems a little convenient that what looks like a picture perfect head fake move yesterday on NO CATALYST and NOT EVEN a USD/JPY move, which tends to be the very last thing to occur before a market decline or rally, was put in to action the day before such statements were made and the market absolutely , utterly failed to respond to a USD/JPY ramp in to the close today; considering the market volatility before yesterday....
You be the judge, but more often than not, you are best served by "Thinking like a criminal" when trying to understand Wall St.
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