The F_E_D minutes on the other hand were a little surprising vs the policy statement. Did you notice the underperformance in Financials for the most part? Sort of like Yellen's last warning about biotech and Social media stock valuations, the minutes revealed the following today...
"Relatively high levels of capital and liquidity in the banking sector, moderate levels of maturity transformation in the financial sector, and a relatively subdued pace of borrowing by the nonfinancial sector continued to be seen as important factors limiting the vulnerability of the financial system to adverse shocks. However, the staff report noted valuation pressures in some asset markets. Such pressures were most notable in corporate debt markets, despite some easing in recent months. In addition, valuation pressures appear to be building in the CRE sector, as indicated by rising prices and the easing in lending standards on CRE loans. Finally, theincreased role of bond and loan mutual funds, in conjunction with other factors, may have increased the risk that liquidity pressures could emerge in related markets if investor appetite for such assets wanes. The effects on the largest banking firms of the sharp decline in oil prices and developments in foreign exchange markets appeared limited, although other institutions with more concentrated exposures could face strains if oil prices remain at current levels for a prolonged period"
We went in to today with Leading Indicators and 3C charts on the defensive, some that have been in line since the first trading day of the year finally turned divergent vs the SPX, the point of Leading Indicators. VIX protection was one of the more notable indicators the last several days among others. I'm not sure the minutes, knee jerk or not did much to change that as you can see by the limited information of the last 2 hours of the day, but still quite negative...Closing Market Update.
Bond Yields which have been supportive the last day or two of the market plunged on the F_O_M_C minutes, the 5 year shows the immediate plunge on their release and the 30y shows the more gradual decline which of course as a leading indicator acts as a magnet and pressures equity prices lower.
The $USD cratered, oil fell lower, although it wasn't something we didn't expect (although it is counter to the traditional $USD legacy arbitrage), while gold and silver gained after the minutes with GLD +.23% and SLV gaining but still finishing red at -.51%.
Equities as you saw for yourself saw an initial knee jerk higher and then retraced the entirety of the move.
On the weak $USD, USD/JPY fell hard and EUR/USD gained ground...
The day was an overall chop-fest to start with, in fact looking at the intraday chart, you'd not even know there was a F_E_D release being the knee jerk was so subdued and retraced while the $USD and treasuries had a much firmer opinion.
I believe the slippage in crude is likely part of what we expected in yesterday's USO Update. The API crude inventories likely aren't going to be of help and probably get us closer to our expected trade set up as API came out with a 14.3 million barrel build, the EIA petroleum report comes out tomorrow morning, but with such an enormous build in the API data, I doubt EIA varies significantly from a massive build, thereby moving USO in our intended direction as posted yesterday, USO Update.
Leading Indicators were active again today, the VIX gains seen over the past several days obviously were in some large measure protection in front of the F_O_M_C as it appears some hedges were lifted after the minutes were released.
You already saw yields above and it's hard not to suspect that commodities are once again acting as a leading indicator as they have called every major pivot of this year.
HY Credit is also selling off on a larger basis and on this shorter term intraday basis on the minutes release as well.
With the market in a head fake zone and everything going negative rather than supportive, it looks like a downside reversal is building up and the Index futures are one of the sharpest displays of that negative tone. This is nothing new, this is what we expected BEFORE any upside move even began when we had placed our initial upside targets (above the ascending triangle that is now part of the rectangle's chop). As far as I'm concerned, everything is running as would be expected, although the specifics with all of the global fundamental events are difficult, the broad strokes are in the probabilities and have been. If you decide to piggy-back trade that bounce, that's great, if you decide to keep positions in line with highest probabilities and be less active in trading, that's really where the highest pay-off comes in to play any way, it just depends on your risk tolerance, the time you have and your trading style or aptitude, we called all 3 bases in advance of any upside move with the most probable outcomes after their moves which is where we sit now.
MCP is an example of this with yesterday's MCP Alert, this is one I'd chose to act on just because the percentage moves are so big, but we had nailed that perfectly yesterday as it closed down almost -18% today!
As for internals, the Dominant Price/Volume Relationship today is better than yesterday's non-existient one, but just barely. The Dow (15) and the NDX (42) were both Close Down/Volume Down, this is the least influential P/V relationship, I describe it as, "Carry on" as in keep doing what you are doing because there's no strong dominant factor that typically influences near term trade. The Russell 2000 had no dominant P/V and the SPX (180) was just barely dominant at Close Up/Volume Down, which is the most bearish of the 4 possibilities, although I wouldn't consider any of this material as it's so weak overall.
Of the 9 S&P sectors, 6 of 9 closed Green with the Defensive Utilities leading at +2.37% and Energy lagging at -1.19%.
The Morningstar sectors don't add much to internals with 150 of 238 closing green, no real oversold/overbought conditions in any of the above for next day/near term influence.
Considering where we are (head fake move above an obvious range and a psychological magnet (SPX)), what the shape of price looks like (rounding over), how we got here (short squeeze with record low levels of shorts via the AAII bear sentiment ) and a VIX slam (on record CFTC net long spec VIX positions), I find the Index futures' 3C charts to be the most exciting, maybe not the most important at this point or in the very near future, but the closest to "SCREAMING".
For example, ES with 3C, MACD and RSI looks like this...
As far as tonight, I wouldn't go skipping around the house, but here's what the Index futures look like thus far...
I will check in on futures before turning in and if I see anything of interest, I'll post it.
What I am starting to see of interest are some of the inverse ETFs like FAZ, SPXU, etc that are looking very interesting so perhaps we'll take a look at more of those and some other interesting stocks like NFLX which we have been keeping tabs on and AAPL along with others.
