NASDAQ

• Falling Prices Spread Pain Far Across The Oil Patch (WSJ)
• ISIS Group Claims Responsibility for Attacks That Killed 27 in Egypt (NBC)
• Russia Unexpectedly Cuts Key Rate as Economy Eclipses Ruble (BBG)
• Greece’s Feisty Finance Minister Tries a More Moderate Message (NYT)
• U.S. homeownership hits 20-year low, but new households growing (Reuters)
• Indian Banks’ Shares Plunge as Bad-Loan Provisions Surge (BBG)
• Underground Terror Network Said to Benefit Would-Be Jihadists in Europe (WSJ)
• Russia warns West support for Kiev could lead to 'catastrophe' (Reuters)

The threat posed by cyber war to our increasingly complicated, technologically dependent and vulnerable financial institutions, markets, banks and indeed deposits becomes more clear by the day. Fail to prepare ... prepare to fail ...

While all the algos are programmed and set to scan today's FOMC statement for whether both "patient" and "considerable time" are still there (as it did last time when it supposedly sent a pseudo-hawkish message while telling Virtu and Getco to buy, buy, buy), the market is torn between the trends observed in recent days: on one hand finally succumbing to the adverse impact of USD strength, which overnight also saw the Singapore Dollar admit defeat in the ongoing currency wars, is crushing both revenues and EPS, as well as outlooks, for the bulk of US companies, even as millennials - long since given up on buying a house - allocate their meager savings to the annual incarnation of Apple's flagship product as seen in yesterday's record, blowout numbers by AAPL which is up 8% in the premarket and sending Nasdaq futures soaring compared to the stagnant DJIA or S&P. And then there is Europe where the mood is decidedly sour this morning, with Greece imploding on fears Tsipras really means business and concerns the Greek "virus" may spread to other peripheral nations whose bonds have also seen a lack of a bond bid this morning.

The Dow is now down 360 points on the day - its biggest point drop in 19 months. Perhaps more notable is that since the End of QE3, The Dow is now down 0.4% - but the fundamentals we hear you cry...

Surprise! The weakness overnight in US equity futures has been eradicated in its best USDJPY-driven fashion. S&P, Dow, and Nasdaq futures have all managed to float higher on a sea of Crude and JPY carry exuberance to fill the overnight gap perfectly... except now that they have, USDJPY and Crude have turned down... We suspect the word "contained" will win CNBC-Bingo today...

• Saudi Arabia’s New King Probably Will Not Change Current Oil Policy (BBG)
• Saudi King’s Death Clouds Already Tense Relationship With U.S. (WSJ)
• Oil Pares Gains as New Saudi King Says Policies Stable (BBG)
• Kuroda Says BOJ to Mull Fresh Options in Case of More Easing (BBG)
• U.S. pulls more staff from Yemen embassy amid deepening crisis (Reuters)
• Putin Said to Shrink Inner Circle as Hawks Beat Billionaires (BBG)
• A Few Savvy Investors Had Swiss Central Bank Figured Out (WSJ)

Major central banks claim to be independent, but they are totally under the control of politicians. Many developed countries have tried to anchor an independent central bank to offset pressure from politicians and that’s all well and good in principle until the economy spins out of control – at zero-bound growth and rates central banks and politicians becomes one in a survival mode where rules are broken and bent to fit an agenda of buying more time. What comes now is a new reality...

The world of investing as we’ve come to know it is over. Financial markets have been distorted to such an extent by the activities, the interventions, of central banks – and governments -, that they can no longer function, period. The difference between the past 6 years and today is that central banks can and will no longer prop up the illusionary world of finance. And that will cause an earthquake, a tsunami and a meteorite hit all in one. If oil can go down the way it has, and copper too, and iron ore, then so can stocks, and your pensions, and everything else.

In October, BBRY shares spiked (and dumped) on rumors that Lenovo had made an offer. Today, after a detailed report from Reuters explained that Samsung executives had offered to takeover the troubled phone-maker (or whatever they call themselves nowadays) and the stocks spiked up nearly 40% - perfectly running stopw through the mid-Nov highs and squeezing shorts out of the market... and now - after hours - BlackBerry issues a statement denying the whole thing... rigged much?

• Earnings Pessimism Jumps as Oil Threatens S&P 500 Growth (BBG)
• It’s Amateur Hour in the Booming Chinese Stock Market (BBG)
• France mobilizes 10,000 troops at home after Paris shootings (Reuters)
• European Stocks Gain With S&P 500 Futures While Oil Drops (BBG)
• Nasdaq Looks to Operate Dark Pools for Banks (WSJ)
• This Guy Called Bonds in ’14. You Listening This Time? (BBG)
• Paris attacks boost support for Dutch anti-Islam populist Wilders (Reuters)
• OPEC price war in Asia intensifies as oil falls below $50 (Reuters)

Let’s focus on what happened in the lead up to the summer of 2011, right before the markets cratered on the back of everything that was going on in Europe and the downgrade of the US' credit rating by S&P. The leveraged loans index peaked at the start of the year and traded sideways up until that eventful August. This was a sign that something was not right in the credit markets; and equities pretty much followed the same pattern.  If we fast forward to today, we can see that the leveraged loans index peaked in July 2014, indicated by the red line in the graph, and has noticeably declined since; at the same time equities continued to move higher, a divergence which is a novelty in this bull market. Is this telling us something?  We believe so - it is a red flag for equities.