What Was THAT?

Tyler Durden's picture

From Nic Lenoir of ICAP

If I come up with a stupid idea, I try to always own up to it. However when it comes to yesterday afternoon I am completely fine admitting that even if I had the text of the FOMC release in advance, I probably would not have made a penny that day. My biggest conviction in Fixed Income for the day was 5s/30s flatteners, and that has somewhat worked, more so overnight but nothing to write home about. I believe the trend will continue going forward but I would have expected a much stronger reaction. As far as direction in Fixed Income with a lot of rumors flying around about the Fed stopping to pay interest on reserves or a QE 2.0 announcement the logical thought would have been to have the market sell-off after the release, especially given that there is supply next week and 2Y yields are already at the lows. In the end it seems like good old technical analysis has not failed us and ever since we tested 123-00 in 10Y US Treasury futures and 129.10 in Bund futures the market has done nothing but rallying. Without expecting to revisit the supports afore-mentioned following FOMC, I did expect a pullback. Now it looks like if pullback we have it should be more than ever a buying opportunity.

Besides Fixed Income though, FX was the most puzzling market. It feels like everybody came out of the woods shorting the USD like it was December 2008 all over again. Now I fully agree that the USD is a piece of junk, but the point is that FX is a "relative" game and I am not too sure what you are supposed to love over the USD: AUD is rich already and on resistance as per the attached chart, USDJPY has a floor defended by the BOJ, and China is pegging! EURUSD is the only one that I could understand would break out. By the way the ECB must be one unhappy camper right now as the 3 largest economies in the world (US, China and Japan) basically have the same currency at this point via pegging and intervention, and they are taking it down the drain. Something tells me that the nice H1 2010 growth in Germany is not going to be repeated if the ECB doesn't step in. For now I am sure they will only have a couple speakers complain that intervention or pegging has negative effects saving proper course of action for when it's too late. Beyond those considerations though, why did the USD sell-off YESTERDAY. Did anybody expect Mr. Bernanke to say anything less than he stood ready to print benjamins on toilet paper if needed to get this thing growing at least nominally? The argument being touted is that the statement regarding inflation being low end is very dovish. The Fed has two mandates: employment and ensuring price stability. If anybody out there thought that ensuring price stability means fighting inflation but not deflation, stop trading and go back to school. Ben Bernanke is a lot more afraid of deflation than inflation, it's not like he earned the nickname helicopter Ben being a pilot during the Vietnam war for crying out loud. The statement yesterday was nothing that should have been adverse for the USD: interest payments were not dropped, QE 2.0 was not announced effective immediately, the Fed simply stated what we already knew, and that is it will do everything in its power to avoid a double dip, at least on nominal basis. Again, I don't disagree with the USD being junk but the timing of the move is odd and it's all about what you sell it against.

I expected Gold weakness yesterday and technically the market started turning but obviously once the USD started getting smacked precious metals went right back to their highs. I remain cautious on the short term outlook for precious metals even the medium term trend is unquestionable. If anything they are a better buy against other commodities that will suffer from trade wars and weak demand.

The twilight zone experiment:

When the S&P future traded up 7 ticks post FOMC yesterday I stood up and offered to bet that stocks would finish negative on the day. With only a bit more than an hour to go before close, the market having shot up 11 ticks after the announcement and trading up 0.6% on the day, I thought that offering even odds should have been a no brainer for any bull out there. The funny conclusion of this anecdote is that no one took the other side. I even said I would literally shoot myself if stocks finished up on the day... Thankfully they did not though I am still not sure that was a good thing. Bottom line is that nobody seemed to understand or care what stocks were doing: that to me is very scary. Keep watching for a break back below 1,130 as the Vix bearish signal for equities is still in effect and equities in Europe are not really confirming the break out.

The only pleasant conclusion after yesterday was that the long USDJPY, long 10Y Treasury, and short 10Y JGBs trade we recommended has moved 14bps already and is threatening to break key support. The rationale is simple: USDJPY is bid by the BOJ, 10Y US Treasurys are supported by the Fed, the carry is massively positive...

Good luck trading,


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johngaltfla's picture

He's right to be concerned. Apathy and allowing the computers to run the markets usually leads to far worse events than the "flash crash". Then again the majority of traders and players involved now do not remember 1987 either. All it takes are just enough stupid policy decisions, Congressional ineptitude, and one of those "unexpected" reports and it will be Game Over.

Not to mention the one big question Washington and the Fed won't answer:

If we're in a recovery why is any Q.E. needed?

DosZap's picture

If we're in a recovery why is any Q.E. needed?


Because they want us paying thru the the rear for everything due to rising inflation, and owing less to all our creditors w/ a inflated dollar.

China has had enough, look for them to be be investing in American companies, or keeping their money at home, and investing it in their infrastructure and their people.

If their smart they would do today.

More QE will also pump up the $ supply bringing on more inflation here at home(currently they say around 1.5%), more like 10%+.

So, their killing several birds by doing so......problem is creating inflation is easy, controlling it once unleashed is another.

Thus,Hyperinflation is coming if they dump another Trillion into T bills, Bonds........look out.

All this is my opinion, and the way I see it.

tictawk's picture

Once the DEBT BASED economy is SATURATED in DEBT, all roads lead to DEFLATION. 

If the Fed had control, we already would have had inflation given the massive stimulus and QE programs.  The FED is NOT the entire market and in the end the DEBT monster wins.  After the debt collapses, the Fed can destroy is currency if it so chooses but it is already too late because the damage has been done with asset price deflation. 

MiningJunkie's picture

How about Larry Lindsay this morning that says that Larry Summer's role in the Obama Administration was "adult leadership" ?? - I almost fell over. If "adult leadership" means across-the-board manipulation of every market on the globe, then free market capitalism must be the domain of infants.


Larry Summers is a Bilderberger, a Trilatralist and a member of the CFR.


PS: 911 Inside job


bronzie's picture

"Bottom line is that nobody seemed to understand or care what stocks were doing"

the sheeple don't understand and those that do understand don't care

(on second thought, perhaps some of those that do understand do care as demonstrated by the recent insider selling - hmm ...)

stocks are for suckers!!!

Boilermaker's picture

Stocks are not for suckers; Stocks are for the 1/2% or less that are involved in pushing the market in a direction known in advance.  How else do you think banks make money by the tens of millions...daily...even with the volatility?  It's induced intentionally.

Cognitive Dissonance's picture

Stocks are for the 1/2% or less that are involved in pushing the market in a direction known in advance. 

Exactly. Markets don't move, markets are moved.

I'm not talking minute to minute but I am talking about general direction. I always find it interesting when it appears Wall Street suddenly is talking as one, where everyone is upbeat and positive. Then, over a day or two, it changes and the herd runs in the other direction. The sentiment has changed before the market does.

Clearly something is filtering down to the traders and mouth pieces, who know when to jump on the gravy train, thus making it real.

VWbug's picture

you guys are so clueless.

i worked on a trading floor for 25 years.

Every bank/broker/trader's DREAM would be to have an INKLING of which way the market was going.

The competition between trader's at different banks is intense, often turning into physical altercations at the bar at end of the day.

Trader's are regularly fired for losing money.

if all markets are manipulated, who is that decides how the pie is cut up?

Who decides what to buy and when?

How is the information channelled?

How come not one trader in hundreds of thousands has exposed the manipulation?

Hey, I know it eases the pain of your lives to believe your failures are the result of manipulation by 'TPTB', butyou should try to come up with a more believeable excuse, lol.

Cognitive Dissonance's picture


If you worked the floor, then you were the low man on the totem pole. The news was told to you and you reacted. You were in the middle of the herd as it stampeded back and forth.

You were a tool. Maybe a screwdriver or a channel lock pliers. But a tool none the less. However, I bet you were a smart tool, right?

Boilermaker's picture

He's a self made, self proclaimed, trading superstar that "never has to work again".

You know...a fucking moron.

VWbug's picture

self made yes, super star no, otherwise i wouldn't have had to work 25 years to get to this point.

i was never once given any direction on what position to have, i was just given limits, and lists of credit allowances for institutions worldwide that we dealt with.

hey, go on with your delusions boys, everyone who is wrong just provides trading opportunities for those who are right : )

TraderTimm's picture

I've worked on the floor, S&P 500 futures, currencies, you call it. I've charted and watched price patterns and developed trading systems. And I can tell you the price patterns I see lately for the indexes after tracking them intraday for over 10 years is a complete change of character.

You can guess who the 'shadow-actors' are, but I can tell you that something has changed fundamentally with how the market behaves.

If you don't believe that, then I suppose you haven't been paying attention.

Boilermaker's picture

He's a self made, self proclaimed, trading superstar that "never has to work again".

You know...a fucking moron.

SDRII's picture

ewww ah a fight in a bar - if this were dealbreaker someone you might even be posterized for that sorry comment


in other news





Vampyroteuthis infernalis's picture


The smart money are the ones in the know. Apparently, you were not part of the smart money or insiders. The majority of stock brokers are not part of the smart money. They are hired in the hope of actually figuring out a system to make money through trades. If not, unemployment awaits them. They also serve as a backdrop to cover the insider's manipulation.

rocker's picture

Obama has no clue how the markerts are manipulated. NONE. There fault is who they trust.

Godman Shafts, JPissMorgan, BlackassRock, Stanley's Organ and Shitty Bank are the ones.

snowball777's picture

You forgot the Bank of Lynching America.

Boilermaker's picture

Why do people continue to try to 'analyze' or 'chart' shit that is completely manipulated?

It's like trying to get an advantage in sports betting when every team is involved in point shaving schemes.  Why bother?

VWbug's picture

jeez i dunno...maybe it's because your main assumption is totally false?


Boilermaker's picture

Ahhh...it's my favorite crackpot self-enriched mega billionaire superstar trader with an 18" dong.


How have you been jackhole?

VWbug's picture

that should be 'ex' trader. I retired from that and now just take small positions for something to do.

i've been good, BTW, and somehow feel so much better for not having to live in detroit : )

mark mchugh's picture

 I even said I would literally shoot myself if stocks finished up on the day...


Saxxon's picture

Yes, relax and see if you can make some money!  What else are you doing this for?

newstreet's picture

So tempting to sell Euros here above 4 even.

Orly's picture

If I may offer a suggestion as to the strange behaviour of the USD, especially as it relates to the JPY:

The USD has been seen as a "risk" asset, as opposed to previously having been considered a "safe-haven" asset.  Once seen in that light, it all seems to make sense.

Don't get used to it, though, because there is going to be a reversion to normalcy in that attitude over the coming days, where the US Dollar takes its "rightful" place as a world reserve currency.  (And, please, if you don't understand the relative game of currencies, then go talk to someone else.  Any "gold, bitches" bullshit and you'll be showing your complete ignorance...)

The upside target is for EURJPY is 113.88.  After that, the USD becomes a safe-haven darling again, the SPX moves towards its ultimate target at 444.36- and the short AUDUSD trade makes a lot of people very wealthy.

Put your scalping robot on EURJPY, Only Short @ 113.88.  AUDUSD, too!

Or not.


P.S.  Thanks, Nic.  I always love your analysis.

Hephasteus's picture

Price of gold in euro's = 964.82

Price of gold in yen = 109367

Ratio = 113.35


What you know about relative currency? What you know about Gold, Bitches!! Bitch.

Orly's picture

I know you're going to lose your ass, that's all.

Hephasteus's picture

Why is there alot more gold than there is receipts on it? Are they going to all run to the medium of exchange and find all these spare bricks laying around and make me sad that I didn't stay in dollars?

You stay in paper receipts peaches. I'll buy your computer for 4 ounces of silver.

Orly's picture

And with no electricity to run it, I would say that I got a steal.

Maybe you can use it as fuel to roast your vienna sausages...if you can find a match to light it.

A couple a dry sticks and some kindling?  I have some and will sell it to you for an ounce of gold.


Cognitive Dissonance's picture


A computer without electricity (and increasingly without the Internet) is just an ugly doorstop.

Howard_Beale's picture

The older ones strung together make great boat anchors too.

Hephasteus's picture

Ha! DC computers bitches!!!


Now quickly go churn your lettuce so my garden can grow.


ertyqway's picture

This comment is so full of win it brought tears to my eyes.


Oh...wait...no, that was just the whiff of brimstone making my eyes water. Well done and carry on.

doggings's picture

Government Sachs took the 0.53.


The part I don't get is why the SPX would lose 2/3 of its present value.

Chemba's picture

Jeffries didn't make very much money in stocks this quarter


Boilermaker's picture

Two words:  Art Hogan

Two additional words:  Douche Bag

espirit's picture

At the onset of the Fomc meeting I was watching the dollah index shoot up as a signal to purchase an inverse ETF, or to short as the case may be, before it fell off the cliff.

Da Boyz give some interesting signals with the dollah prior to market moves.

JiangxiDad's picture

Good for you Nic for revisiting that weird speech and its aftermath. After an hour or so of trying to figure out what he meant and watching the various mkts. react, I decided he had announced a sober, slow, carefully orchestrated death without fireworks, and I think most of the mkts. reacted accordingly. This pre-obituary resulted in taking a little of the shine off of our already moribund currency, as its death is a certainty, but perhaps not imminent.

knukles's picture

T'is the bright dawn of another perfect day.

The housing market has been decimated, ZIRP is forever on the horizon, the HFT/algols have taken control on the stock market rendering the viability as an investment vehicle all but worthless, the same are migrating to FX and commodities, precious metals are rigged and interest rates are too damned low to fund  anybody's retirement egg.

Indeed, the institutions vested with protecting and nurturing the viability of capital markets have destroyed their charge instead, having abolished any sense of the rule of law and intent of common sense regulation.

If I were not worried about being labelled a nut case, delusional, tin foil hatter, conspiracy theorist, pessimist, illogical, clinically depressed or just plain bat shit crazy, I'd suggest that if anybody had tried, they couldn't havescrewed up financial markets more effectively, probably with the hidden objective of the government ultimately nationalizing private savings for the "good of the populace" not to mention a new shadow tax base, considering how badly things have turned out for Poor Ma and Pa Kettle. 

But I won't even go there.  I'll just grit my teeth, hold my sphincter as tight as possible, not bend over to pick up the soap and pretend it's another day in paradise.

Orly's picture

When the truth is seen, no matter how shameful it appears on the surface, one must accept it and live according to the realisations.


Yes, but Orly what is the kink from AUD/USD etc to the thoughts the SPX would fall to 444?

Cognitive Dissonance's picture

If I were not worried about being labelled a nut case, delusional, tin foil hatter, conspiracy theorist, pessimist, illogical, clinically depressed or just plain bat shit crazy....

Sounds like a non denial denial to me. :>)

And you exemplify the perfect case of how the control system controls through subtle and not so subtle peer pressure. And before someone tells me that it's the peers that decide what and how to pressure, I'll assert up front that it's the other way around.

It's the idiot control box, aka TV (but also radio, Internet, newspapers etc) that tells us what's proper and what's not, what's acceptable to discuss and what's off the wall and thus a social third rail. Since we then repeat what we're told, we become the control system. But it all starts somewhere.

I started an experiment a few weeks ago. For one week I watched Glen Beck and then watched what was written in the comment section of various blogs, including Zero Hedge. Then I watched Countdown/Keith Olbermann for a week. While I will not use a broad brush, I'm not surprised to see very little original thought and much parroting.

Orly's picture

I am also not at all surprised that Hasslehoff was the first to get eliminated.  The man cannot dance!

And did you know that Paris Hilton got banned from Japan!  Wow.  What is this world coming to?


Cognitive Dissonance's picture


I can understand being banned from Starbucks or Macy's. But an entire country? What will those poor citizens do now that they can't get their Paris Hilton fix live and in person? Surly this is the beginning of the end for Japan.


old_turk's picture

I have done the same experiment.  Now, I can only watch any of the talking heads for about 2 minutes before I develop a rash and have to turn it off.

Apparently, my capacity for critical thinking overpowers my curiousity thereby making increasing my hypersensitivity to 'talking points'.

My conclusion:

We're doomed.

It's not about 'getting ahead' or even, survival anymore, it about a legacy of paranoia and the marketing said paranoia.

knukles's picture

teh heh heeeh

Oh pshaw, you caught me, dab gummit.  Non-denial denial of the non-denial sort pleading innocence and fealty to the crown, kissing the ring, humor as Back in the USSR.... 

Now to the preventative media, Jerry Springer re-runs.  Kinda ranks right up there with imagining who'll replace Larry Summers.  I been rooting for Elmer Fudd, as I thought we could write off the next series of Economic Fixes more seriously.

"Bud dip bud dip bud dip...that's all folks!"

Cog....  Do you realize that media propaganda really is reality television?  Sorta like my newest game, "First Life".  Don't need an Internet connection to worry about making shit up to live in your own world of imaginary denial. Great for relapses, too!