Archive - Jan 6, 2016

One of these bubbles is not like the others, one of these bubbles just doesn't belong... and yet still "officials" and talking-heads proclaim it cheap...

Sure Oil can go a dollar below this low, but for all intents and purposes this is the bottom in the oil selloff that was predicted for the start of the year.

On December 3rd, a month before Saudi Arabia carried out it largest mass execution since 1980 - subsequently setting the region on fire - Arjun Sethi wrote an article for Al-Jazeera titled: Saudi Arabia Uses Terrorism As An Excuse for Human Rights Abuses. According to Cora Currier at the Intercept: Al Jazeera’s headquarters in Qatar appear to have blocked the article outside of the United States because it is critical of an ally of Qatar.

Market psychology established in recent years is reversing. Market volatility is rising and will remain pervasive for a while as psychology, the change in direction of Fed policy, and the increases in general uncertainties, will all conspire to shape an environment ripe for sharp spikes in volatility which will be further amplified by rickety market liquidity.

The concern, of course, is that these divergences are not resolved by strengthening stock market closes (a welcome sign of improved investor confidence) but, rather, by pullbacks in the indexes themselves– a decidedly less envied outcome.

Resented with no comment...

Is Tim Cook in the house? Or is The SNB doubling down?

They tried to slam VIX (and failed). JPY was sold (but failed). And Crude was temporarily ramped (but failed). So how do you stall a sell-off - BREAK THE MARKET AGAIN!!

Just as we saw in the August collapse, US financial stocks appear to be facing the harsh reality that other markets already recognize. While US financial credit markets have been anything but exuberant for weeks, equity options markets have now turned their bullish backs on the banks as Bloomberg reports the ratio of bearish to bullish options on the S&P Financials ETF has climbed to the highest level in a year this week, reflects rising demand for protection against losses as NIM hopes collapse and Fed "error" probabilities increase.

If history is any guide - the mysterious flash crash "signal" that we have seen yet again in VIX suggests stocks rally and VIX tumbles into the close today...

"Though the decision to raise rates was unanimous, some officials expressed concern about lingering low inflation and the stifling effects on the U.S. economy of a strong U.S. dollar and slow growth overseas."

Since The December 16th FOMC decision to hike rates, Gold is up over 2%, Bonds up 1%, and stocks down 3% suggesting the word "error" with regard Fed policy. As The FOMC Minutes are released, traders anticipate confident-hawkishness and a focus on ignoring current data in favor of preferring their own confident outlook:

• *ALMOST ALL FED OFFICIALS AGREED LIFTOFF CONDITIONS MET IN DEC.
  
• *FED: LINGERING RISKS TO OUTLOOK INCLUDED FURTHER USD STRENGTH
  
• *A FEW FED OFFICIALS SAID FINANCIAL RISKS COULD ALTER RATE PATH

January's meeting has negligible probabilities for a rate move but March has 45% chance of a hike and 3% chance of a cut. The apparent unanimity of December's decision appears questionable given the Minutes suggestions of some dissent.

Pre-FOMC Minutes: S&P Futs 1983.25, 10Y 2.19%, Gold $1094, EUR 1.0755, WTI $34.05