Opinion & SPY 5/3 $160 Puts P/L

For now I'm not going to say too much on the F_O_M_C policy announcement because as near as I can tell, this sounds like a statement I would make from one of the board meetings I have to attend (went last night-I'm the Secretary and Treasurer) if I wanted everyone to think I went to the meeting, but we really  cancelled it and went out drinking instead.

"Prepared to Increase or Reduce Purchases"

That sounds like subterfuge on its own, but considering the way we have been documenting how the F_E_D has been "Slow Boiling the Frog" in backing out of policy accommodation, I think this is just the next step, they already put the market on notice by even talking about it. Two years ago there would be NO MENTION of anything like this, nothing other than, "We have more tools we can use if need be" "We will do whatever it takes".

Wall St. knows what the F_E_D is saying, Hell the F_E_D is emailing it to them almost two days before it's released to the public!

This is the next natural step is to not create panic, but introduce "uncertainty"- make no mistake, the market WILL panic on uncertainty, that's why we say, "When the missiles fly, it's time to buy", it's not because of war profits, it's because the uncertainty of whether there will be a war or not are now removed!

We here at Wolf on Wall Street know that the probabilities between "Increase" or "Reduce" are about 15% to 85% and that's conservative.

I decided to close the May 3rd puts because expiration is close, even on a knee jerk reactionary move we'd lose profits through time decay, even if the market were lower tomorrow.

I would have put this out if the signals were there earlier, but they weren't there at all in the futures or averages, but developed VERY fast in currencies and I told you as soon as I saw it. I think the rest of the Puts have enough time on them.

At this fill, the position made +42%.

That puts our Options Tracking Portfolio at...

Weekly rank #4 of 714

Monthly rank as it rolls forward, 2 of 311

Here's our last rank for the options tracking portfolio, 57% and 82% , but give the new positions time to work.

I still have a lot to watch in the market.

Closing May 3rd SPY 160 Put

IWM 5/10 $92 Calls for a knee jerk move

I CANT CONFIRM THE SAME IN EQUITY/AVERAGES

I do believe the currencies, the only one  that ha some signs is the IWM, but they have been there, no other average is showing it, but currencies are.

I'm seriously thinking about taking a short term IWM Call as a hedge for a knee jerk move which would be a gift.

Quick Futures Update-Knee Jerk Bounce Likely

The Index options, there were leading negative divergences in just about everything so they are either negative or in line, the only thing that stands out is the 5 min NQ chart.

This is the 5 min NASDAQ 100 futures, they are still in a leading negative divergence, but the relative positive suggests a bounce short term followed by downside which would be nice, but I don't know because no other ES or TF confirm in any way. The 5, 15, 30, etc min charts are all leading negative there and in NQ as well, just this 1 timeframe.

Quickly, currencies

The USD has a 1 min positive divergence, 5 min is positive, not huge though, the longer charts are stronger. No real magic bullet there, it looks like the market is unsure.

1 min Euro has a positive divergence, interesting this close to the F_O_M_C. The 5 min looks like NQ above, except a deeper leading negative position-so do we get a knee jerk bounce? Euro seems to think so.

The same could be said for the $AUD, not as obvious, but there. The 5 min is leading negative, but does have a relative positive.

The 1 min Yen is slightly below price, not confirming, the 5 min is in line, I think the Yen COULD be out of the game if we do get a knee jerk bounce, it won't interfere, but it will come back in to the picture.

The EUR/USD, USD/JPY, EUR/JPY and AUD/JPY all have 1 min psoitive divergences, many in the last few minutes, these are all market positive.

I think we get a knee jerk bounce.

Leading Indicators

I know the market is moving down, most of us have puts and shorts, we want to enter new ones in to price strength, the F_O_M_C knee-jerk might do that for us, although my gut feeling is not great with no presser after and I'm taking the dramamine now an hour in advance of having to turn on CNBC for the F_E_D policy statement.

OK, I've been showing you these for a while, they have looked so bad that I think most people dismiss them as being wrong, I don't think they are, I think the move from March of 2009 is a sugar high, a house of cards built on shifting sands, I believe these indications are true because we quite simply have never been in a similar situation with the world so connected in every way, but especially economically and financially and we have never had such a horrible depression, jobless non-recovery with unprecedented F_E_D and government actions which DO HAVE TO BE UN-WOUND-THAT'S THE PAINFUL PART (e.g. 2000 & 2007).


*Please remember that the majooority of the time we have a F_E_D or F_O_M_C event, we get the decietful "knee-jerk" reaction. For newer members, go to the archives and look for F_E_D/F_O_M_C days and you will see I warn of this reaction that is almost ALWAYS wrong so you don't get caught in a very strong, emotional move that is going to fail a strong majority of the time.

Also, while fear is more powerful than greed (hard to believe I know), please don't get caught up in greed, we purposefully try to get in position earlier than anyone else, we try to do it as price is moving the opposite of our intended trade because we get better entries, better rates and have lower risk, just remember WE LET TRADES COME TO US, be patient if things go south quickly, be patient if they go north, that's a gift and remember we have the ECB tomorrow-theere's a chance the F_O_M_C and ECB act in concert, they did in November of 2011 with several other CBs.

*Leading Indicators are always compared to the SPX in green unless otherwise noted below the chart.

LI's in no particular order...

 Commodities FELL out big time with the SPX today, they had already been negatively divergent at yesterday's "NEW CLOSING HIGH..sarc.", but this is bad and considering the dollar, extra bad.

 Longer term, this is a massive dislocation between the two risk assets that use to move together.

Commodities vs. the $USD, note at the green arrow we have the normal inverse relationship, at the red arrow commodities are falling despite favorable conditions with the $USD falling, even today.

 This is the longer term view of our Sentiment Indicator, FCT, it has been severely disconnected for a while, but zoomed in recently it has been in line. Today it dropped very hard (in red) vs the SPX, the sentiment is RISK OFF.

However we always want to be careful we are not part of some Wall Street last minute trap, we want to use those to our advantage.

Yields are like a magnet for the SPX, over the last few days, not good. Today...HORRIBLE.

The long term view has a HUGE dislocation, these are some of the biggest dislocations I have ever seen.

Currencies, the normally supportive $AUD fell out hard today-market negative

 Longer term, there's a significant divergence in effect, more than enough to count toward a sharp reversal.

 Euro is favorable today, not helping the market much though.

 Longer term, the Euro has been SEVERELY dislocated from the SPX since the EXACT SAME TIME AS MY TREND CHANNEL CALLED A STOP OUT AND BREADTH INDICATORS FELL SHARPLY.

 The Yen 1 min is showing it's normal correlation with the market, I fear that the market may be following the Yen more than the Yen following the market, this was the gist of my 2 part series, Currency Crisis, the Yen is the ultimate Black Swan and few people have any idea. I even showed you yesterday the market's noon-ish highs correlated with a reversal in the Yen.

Yen falling longer term is market positive, look at the recent behavior, this is what I predicted 4 weeks ago in the Yen.

 $USD intraday and the market is in line with the $USD today after having ignored it most of the year.

This was also in "Currency Crisis", the large "W" bottom in the Dollar and why I think the Dollar could sky-rocket from here, sending all risk assets sharply lower.

 HY Credit (HYG) finally has a sharp leading nergative divergence and all in half a day .

The white arrow is them using HYG to effect a bounce in the market this morning.

 Look at the same within the trend to get an idea of how sharp this half day move has been. I do think there could be a sharper, more defined negative divergence in HYG before we see a really strong reversal, but I could be wring, it's just usually Credit Leads.

Junk Credit with an even worse divergence today after having been very supportive as they manipulated the market higher.

 TLT should have a mirror opposite relationship, the last 2-days it was used to move the market higher, then yesterday demand for safety overwhelmed the manipulators.

 Long Term TLT has the normal relationship in green, at white it is seeing demand for safety

VXX as mentioned found support instead of moving lower as the market moved higher as the correlation suggests, again there was demand for protection as the VIX futures were bid up.

Finally here's today's sector rotation, mostly a flight in to safety of Utilities, Staples and Healthcare.

Leading Indicators Are Coming, But...

Oh My... This is why I keep you updated on the positions of these, so we can get in position while we still have time, sometimes its a pain and you have draw-down, but at other times, when you hear the crack, it's too late to do anything about it.

This update of L.I. is not good for the market, I'd be considering any short positions you might like or leveraged Bear ETFs, we will try to look closer at ideas and maybe see if a knee-jerk reaction creates opportunities, but you recall I said last week and early this week, "I'm not loading up on shorts" (I was taking some on, but not backing up the truck), that's because I knew Leading Indicators had to diverge before we were there or even close, we have that divergence.

I still wouldn't rush, but if there's something you liked anyway and were on the fence, I think it probably can't hurt. remember there should be a lot of volatility, this gives us opportunities, but you have to have wider stops and I personally wouldn't have any stops in with my broker, all mental, I wouldn't want to get knocked out of a good trade on normal intensifying volatility on a F_O_M_C day.

An FYI-Please Forgive me, but...

I will be VERY slow on email responses today as my first responsibility is to the whole group and there are a lot of things to watch so I ask for your understanding in advance.

Quick Update

I'm getting in to Leading Indicators now, but I think my feelings yesterday about the market DESPERATELY (that was the title of the post) struggling for 0.25% while CONTEXT declined, told us what we need to know and justifies our positioning with the puts and other related positions.

Take a look at this, remember what I said in my last post about small adjustments to keep the market in a range pre-F_O_M_C...

 Just around the time the market "NEEDED" help to bounce, it got it as we see from the SPY arbitrage, I'm not sure which of the 3 assets were used, I'm just looking in to that now. Note how flat it is now, remember what I said about small adjustments.

 The 1 min SPY today

CONTEXT for ES, as I said yesterday, it's declining which means normal risk assets that normally move with the SPX are selling off, this is a negative signal for the market and at this point the model for ES is showing a negative -21 point differential between the model and where ES is trading now. The last major reversal (1-day with a -2.33% loss) saw a 40+ point negative differential and ES lost almost exactly the same amount as the model had implied, I think it might have been the model at 41 and ES lost 43, something close like that.

Here Comes the IWM

I told you the IWM leads, it led to the downside, it didn't lead the earlier bounce, but it looks like it's coming now. I'm going to switch layouts quickly, but there's nothing strong or positive building in the market, at best short term there's some smaller moves that look like they are meant to drift the market in this area. The F_O_M_C is at 2 p.m., strangely there's no post announcement press conference. I'm not going to read in to that, but I think it could create a lot of volatility as the market does not like to be unsure and not have its questions answered.