Sunday, September 13, 2015

Market Analysis for Week of 9/14/15

My comments will be brief because the extreme binary event of the Fed this week makes any kind of speculation on price movement impossible.  I personally believe the Fed desperately wants to get off the zero bound, but there is no economic reason to raise rates, and there won't be, so the longer they wait the less chances they will have.  While I have no idea if they have the guts to pull the trigger this week, this is the first Fed meeting all year where it's at least possible.  Maybe they pass now but she clearly sets up October because one thing is for certain: they've done the world's worst job at signaling their intentions.  One thing Bernanke did well, and I can't tell you how much it hurts to say he did anything well, but he was easy to read.  I knew what he was going to do before he even thought it.  Yellen, on the other hand, as a woman, is an impenetrable enigma wrapped inside a mystery, spraying a cloud of ink like an octopus everywhere she goes.  Like, what do you want, baby doll, just tell me what you want.  Why do I always have to figure it out?   (I might not be talking about the Fed anymore.)

If they do raise rates, I'm thinking they already have the ECB and BoJ on deck to expand their QE in October.  Personally, my strategy if I was the Fed caught in this self-inflicted box, I would spray another ink cloud about how it could be any meeting now and arrange with Draghi to increase his QE first, causing a massive equity short squeeze, and then raise rates in Oct with stocks at higher prices and shorts licking their wounds.  But chances are they aren't thinking like a trader.  So in lieu of a bold prediction, this is such a binary event that however prices react should have follow-through.  And I don't mean the instant knee-jerk reaction, but once the bots settle down, meaning, particularly the weekly close should be revealing.  It might be easy to figure out right away, or maybe it takes till Friday.  But there are patterns to watch.

Dollar daily.

I ended up getting completely flat and will stay that way, barring a day trade, into the meeting.  I prefer to trade the dollar long but I won't be fighting the market if it doesn't like what she says.  I was hoping the dollar would make it to the top of the wedge before the meeting but it curled over due to struggling equity prices.

 The Euro is technically sustaining this breakout but nothing matters with Fed day a cometh.  If I have to abandon the dollar long ship altogether, I will go with.

I have nothing to say about gold, except that I expect it will be straight-forward.  Raising rates would be bad.  Staying at zero could see some buying, which would be short-term, imo.  Gold is going lower in the bigger picture.   I have no interest in the long side of the metals (except a short-term opportunity) until the Fed starts talking about more QE, and I don't believe that will happen until next year.

I will say one thing about silver.  IF the Fed raises rates, keep an eye on silver Thursday night, especially at the China open at 9:30pm eastern.  Probabilities would be higher than normal for a thin market smackdown.

One major note about the ES.  The Large Specs haven't been this net short since mid-2012.  The Small Specs haven't been this net long since before that.  The VX longs are also at an extreme.  This is a recipe for a big move.  Someone is going to lose big.  If I knew the direction I'd be happy to tell you.  I'm just going to respond to what happens.  

*Adding this after seeing the Sunday night open with the ES now up 10pts.  It should be noted that this is options expiration week, and there's been a lot of puts purchased during this selloff to suck premium from in a classic crush-the-VIX, squeeze-the-shorts, transfer-the-wealth type of move.  Just something to keep in mind.

Oil has a nice triangle to play, but it looks like it will be forced to make a move before Thursday, though, so it could be tricky if the dollar makes a huge move.  It would be nice if it breaks to the downside early in the week but holds the horizontal support at $43.20s and then moves back up to breakout to the upside on the Fed.  Just a thought.  More info needed.

Bonds weekly.  In No Man's Land as far as I'm concerned.  Nothing  I'm interested in.  Not until it breaks this giant triangle.

I'm sure next week will  have more clarity.