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Beware The "Massive Stop Loss" - JPM's Head Quant Warns This Unexpected Downside Catalyst Looms Next Week
The uncanny ability of JPM's head quant, Marko Kolanovic - the man Bloomberg recently called "Gandalf" due to his predictive success - to call key market inflection points has been extensively documented on these pages, most recently a month ago when we showed that just after he said the "rally drivers are gone with downside risk ahead", the market proceed to swoon, two months after the same Kolanovic correctly predicted that the "technical buying begins."
We bring up Kolanovic because earlier today he released a new note in which he together with JPM's Global Equity Strategy team lays out both the longer-term, as well as the immediate risks facing the market.
First, we lay out JPM's longer-term concerns for the S&P500, starting with the same one noted previously by everyone from Zero Hedge, to Goldman, to Credit Suisse to Citi: profit margins, and specifically their lack of future growth as a result of relentless dollar strength. Here are some of the main ones:
Negative earnings effect from energy is likely to fade away, but strong USD will continue to exert some drag causing further negative revisions to current 2016 earnings growth estimates of 8.5%. Equity multiple will be limited from re-rating higher, in our view. The market is of age, already trading at close to 18x (NTM) P/E and we expect higher volatility going forward.
The current year is likely looking to print flat earnings growth—negative revenue growth roughly offset by some margin expansion and significant share repurchases. While buyback activity should continue to synthetically boost earnings growth in this lackluster economic environment, margin expansion is near full exhaustion and in 2016 will possibly turn negative for the first time in this recovery. This suggests that we need at least some top-line growth in order to avoid a possible earnings recession next year. In that vein, one of the biggest risks equities face is a continuation in the strengthening of the US dollar and the Fed getting ahead of the curve (“policy error”). We estimate that a 5-6% change in the USD TWI corresponds to ~3% change in S&P 500 EPS.
Then there is the question of the what a rising rate environment will do to equity returns. Here, JPM tries to walk a fine line and spin a contraction in financial conditions as if not bullish for stocks than hardly bearish...
Historically, higher rates have meant lower but not necessarily negative equity returns. Correlations between rising short-term rates and S&P 500 performance imply a negative relationship, especially in a lower growth environment like today. During previous liftoffs equity markets have typically fared well, but the macro environment was also more supportive—GDP is less impressive now at +2.25% y/y vs. +3.4% y/y during previous episodes and the USD has increased +10% y/y on a trade-weighted basis vs. basically unchanged previously.
Which brings us to another topic covered extensively here previously: the possible inversion of the yield curve as the Fed hikes the short-end while the long-end prices in policy error, or a failure to stoke inflation. Indicatively, the 2s30s is now the flattest it has been since February.
More so, the slope of the yield curve is also a factor to consider, with the worst case for equities being a rising rate scenario with a flattening/inverting yield curve. We are not there yet, with 10s/2s spread having averaged near 140bps.
And then it gets interesting: Kolanovic' first prediction - expect not only higher volatility but higher levels of tail risk.
Also, higher rates have typically resulted in higher market volatility. While it may be difficult to quantify, certain parts of the market could be highly levered to the prolonged zero interest rate policy (i.e., long/short, distressed funds) which may require risk to be re-priced.
In our 2015 Outlook published last year, we forecasted that the average VIX level would increase from the 2014 average level of 14 to 16 this year. The average VIX level ended up at 16.5, very close to our forecast. While historically periods of falling volatility lasted much longer than periods of rising volatility, we again forecast an increase in volatility for 2016. Our forecast is for the average VIX levels to rise from the current level of ~15 to an average of 16-18 next year. We also forecast higher levels of tail risk.
What does this mean in practical terms:
Tail risk is a measure of volatility of volatility, so we expect both quiet periods and periods of volatile selloffs such as the one we saw in August this year. Our forecast of higher volatility is primarily based on the rates cycle and uncertainty around central bank policy, as well as extremely low levels of market liquidity.
JPM also warns about a market which has lost more than half of its orderbook depth as a result of collapsing liquidity over the past decade courtesy of Reg NMS and the advent of predatory, order frontrunning HFT algos. As a result, the market no longer has any capacity to "absorb large shocks"
While equity volumes look robust, market depth has declined by more than 60% over the last 2 years. With market depth so low, the market does not have capacity to absorb large shocks. This was best illustrated during the August 24th crash.
Additionally, high levels of geopolitical risk are likely to add to market volatility. These risks include increased tensions in the Middle East (e.g., between Russia and NATO allies), increased risk of terrorist attacks in the US and Europe, as well as strains in the Eurozone related to the immigration crisis. Furthermore, levels of equity volatility appear to be below the volatility levels of other asset classes. Following the August spike in volatility, equity volatility dropped below the levels of volatility implied by other asset classes. Most notable is the divergence of equity volatility to levels of credit spreads that kept on rising during H2
* * *
Which then brings us to what Kolanovic believes is the key near-term risk.
Not surprisingly, the biggest potential selloff catalyst is the Fed itself and specifically the Dec. 16 FOMC announcement, which the Fed is desperate to guide as being "priced in" by the market, but considering the Fed's track record with getting any forecast right, concerns are starting to grow. "As for near-term risks—we believe the most imminent market catalyst will be the December Fed meeting in which we are likely to see the first rate hike of the cycle."
* * *
So far so good, but to a market which has traded mostly on technicals and program buying (and selling) in recent months, there is something far more troubling than just what the Fed will announce:
This important event falls at a peculiar time—less than 48 hours before the largest option expiry in many years. There are $1.1 trillion of S&P 500 options expiring on Friday morning. $670Bn of these are puts, of which $215Bn are struck relatively close below the market level, between 1900 and 2050. Clients are net long these puts and will likely hold onto them through the event and until expiry. At the time of the Fed announcement, these put options will essentially look like a massive stop loss order under the market.
What does this mean? Considering that the bulk of the puts have been layered by the program traders themselves, including CTA trend-followers, and since the vol surface of the market will be well-known to everyone in advance, there is a very high probability the implied "stop loss" level will be triggered, and the market could trade to a level equivalent to the strike price, somewhere in the 1,800 area, or nearly 200 points below current levels.
Which would be a tragedy for the Fed: after all, nothing is more important to Yellen, Draghi et al, than affirmative market signaling - pointing to the (surging) market's reaction and saying "look, we did the right thing", just as Draghi did on Friday when he explicitly talked the market higher in the aftermath of the ECB's disastrous announcement.
The irony will be if, regardless of what the Fed does, the subsequent move is driven not by the market's read through of monetary policy but by the "pin" in this massive $1.1 trillion option expiry, the biggest in many years, one which if recent market action is an indicator, suggests the stop loss strike level will be taken out in the process setting the "psychological" stage for market participants who will look at the drop in the market, and equate it with a vote of no confidence in what the Fed is doing, potentially forcing the Fed to backtrack in less than 2 days!
Whether this happens remains to be seen, and we are confident the Fed's "arm's length" market-moving JV partner, Citadel, is currently scrambling to prevent any imminent selloff. However, considering Kolanovic' track record of hinting at key risk inflection risk, it is quite likely that whatever the ultimate closing price on December 16 and, more importantly, December 18, volatility may very soon have an "August 24" type event.
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"Scary Christmas and Crappy New Year to all" courtesy of the FED and its criminal syndicates.
Thank you so much for the well wishes but this year I will choose to not participate.
It's ok Santa will make it all better!
Trillion? Chump change
Print!
And it will be an August 24th event if it happens. This time people will buy when it is dropping thinking the HFT's will save them. They will sucker more in as August 24th will be fresh in the minds of greedy traders. Thats when they hammer it further south, until the rule kicks in for the 3rd time that day, halting the markets until the next trading session. Then they will do it again. Thats how I see it playing out.
Buh some goddamn Bitcoin for your kids tish Holiday Season you ill-mannered dillholes!
https://localbitcoins.com
So if one were to want to heed this warning and potentially make a profit out of it - how best would one do this?
If you were Citadel wouldn't you just blow the stop level with a flash crash before the FOMC meeting?
What I find so amusing is that the whole point of the Fed is to provide market stability, yet whenever they have a meeting the market is at its most volatile. They should just agree not to meet.
Seems the 3:30 ramp arrived on time...
If this plays out as explained in the article, WWCD? What would China do? Reveal their Au holdings? Will it finally be time for the unveiling?
Your question is the key here.
Nearly three years ago Chris Martenson made a prediction on the markets with information similiar to that presented here.
In it he gave the impression the S&P would crash possibly 900+ points. He did say his timing was most likely off but I did my homework because imacoinnut and the Crash course is what changed my life.
So to answer your question the best thing to do right now is to buy SQQQ .
Coinhead - with all due disrespect -
Please go fuck yourself with a roll of barbed wire wrapped Bitcoins lubed with flaming napalm.
At least, finally, you would be entertaining as a YouTube video.
If, if, if the current high dollar is already equivalent to a .50 rate tightening; just maybe the FED .25 bump will make the "real world" punch-drunk from an equivalent .75 tightening. This could derail poorly maintained (under-capitalized) rolling stock, etc, etc, making something resembling a train wreck.
What is the reason commodities are lower now - CRB, DJCI- than in the pit of 2009's despair? With 5 years of inflation or currency devaluation tacked onto commodities nominal prices, what is the real takedown, -30%?
Some of us would still like to believe in Santa Clawsback.
Seems Janet is not taking Kolanovic's calls so he's left to put out press releases about the "dire" state of downside if she and the GS guys stop the heroin rush and do a measly 25 basis point bump. I'm actually thinking they split the baby and do 15bps just to show they do something but no so much it rocks the boat.
Sad thing is even on ZH, most members are retarded. This may be the biggest blog post of the year as a warning, yet full fucking forward for retardville right here on ZH.
Going full potato in 3, 2, 1...
Thanks Vindaloo
and all this time I thought I was no better than an Idiot.
HO HO HO!
My Prayers have been answered. Clear my calendar, I'm going in.
negative earnings effect from energy is likely to fade away? In my way of thinking, a negative earnings effect would be cumulative, as the debt grows, but the servicing revenue does not. is this common core math, for quants?
I follow an options trader that measures profitability and loss of Covered Calls and Naked Puts, Long Calls and Married Puts, Long Straddles and Strangles. A few minutes ago he logged bull market indication (Friday was within the realm of bear).
So end of december could be a real shock.
Quite a large number of Dec 19 puts on SPY going down to an implied level of ES 1800. Scary stuff.
Holding my shorts and will tighten my stops, IF there is a big drop this says it will be a HISTORIC buying opportunity. Draghi made it plain and clear that the only mandate for the central banks is Price (Equity) stability.
If you talk about your stops, you haven't got any stops.
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oil got the memo this morning when it broke $40.00 ... seems like bodies being injected into the river as we speak today
But, Leo Kovalkis says its a great time for solar stocks
Being that the Fed/Criminal Bank Cartel actively runs a hedge fund via its criminal conduit CNBS to lure shorts, selling etc .. ill pass... Thing about it logically. These scumbags are so gracious to give me free advice. ? Need any more evidience. 10-2...This all may be great advice in a real market but not in one that is 100 % controlled
Fed shocker... rates go up... dollar soars... stocks soar... bonds soar... everything "American" soars.... gold.. oil... commodities... everything "physical" dumps to 0.
Well then I will buy all the physical for ..... nothing
.gov rules that owning "physical" anything is an act of terror... confiscates everything... socialist utopia ensues... millions starve...
Inventing a rule is one thing
Enforcing a rule is a totaly different thing, especialy when the rule in question is not righteous but unjust
Goog luck enforcing banning physical on 7 billion people
Inventing a rule is one thing
Enforcing a rule is a totaly different thing, especialy when the rule in question is not righteous but unjust
Goog luck enforcing banning physical on 7 billion people
I'm sure there will be a few holdouts but most will comply... less the Kardashians are taken off the air or they lose their EBT...
If you wake up and the EBT is no longer working, oil your weapon because the fit has hit the shan.
Since that is stealing, the law is on my side.."You will not steal" or this one "you will not lie"...God has it right because He is righteous and the banker, lawyers, and religious leader of humanism are damned.
Amen
Be righteous or be damned !
Double post just to make sure you read that twice ;-)
It was worthwhile reading it twice.
Isn't that Sanders' platform statement?
You nauseate me, Mr. Grinch.
You have spiders in your brain and garlic in your sole....Mr. Grinch!
so btfd then?
buzz, I'm not sure what to do so I'm just gonna scratch my nads and watch a Dancing with the Quadriplegics rerun.
Who Knew that Janet Yellen was a prepper?
http://wethesheeplez.blogspot.com/2015/01/why-elite-are-buying-secret-hi...
That is the plan but they will not raise rates unless they plan to wreck the derivative market followed by everything else; something that cannot be ruled out.
Doesn't higher volatility imply higher fear index and higher gold price?
In a normal, rational market, sure. The problem is, its not a normal, or rational market.
only in a real market ? this article speaks of fundamentals and technicals as if any of it even exist any longer ? HA AH HAHA HA HA HA what a fucking bad joke it all is. Better to ask your cat or flip a coin these days or better yet step aside and laugh at these ass wipes
one thing the author doesn't mention as a potential catalyst is if the fed actually follows through and raises rates.
Well I guess they'll be getting rid of stop losses and 'good until canceled orders' next.
Oh wait....
http://www.marketwatch.com/story/nyse-joining-nasdaq-in-eliminating-stop...
i disagree. the rate rise may be a backdoor to devaluing the dollar which would immediately reflect on the bottom line of the usa listed multinationals signalling everything is okay again. the timing is perfect. now is a good time to scalp assets on the cheap as only an extended flash crash would afford the .1%ers. the geopolitical situation plays directly into the current economics with the tttuuurrriiiissstttts imposed fear caused personal financial austerity. christmas retail data says christmas doesn't have the juice anymore. the irony is the benchmark for the recovery from this recession will be the current level of the recovery that never was.
OK, how do you get to a back door devaluing of the dollar? The currency markets are about 2-3 off where they should be if they were pricing in any raise...?
in a normal market a rate increase chases money out of bonds into equities until equilibrium between growth and cost of money equalizes and the cycle turns around finally reflected in a fall in equities as interest rates reach a max point. as equities devalue the dollar follows reflecting the flight of capital into bonds. that is the way it is suppose to work. check the correlation between DXY and the sp500.
in this case zirp is already at max point on the growth/interest rate equilibrium chart. a rise in interest rates will immediately cause a selloff in equities and other dollar denominated assets. the dollar devalues and all is right in the world....just not your world.
Uuuhh, actually all those puts offer a nice support for OPEX. If the sell-off happens, the holders will start closing them. Buying pressure.
If the sell off doesn't happen, well, mission accomplished: massive pay-out for the premium sellers. And those who will see no sell-off happening will get frustrated and star closing some of those puts/hedges ----> SQUEEZE higher.
So whatever happens, it's actually kinda bullish. I'd be more bearish if there was a huge open interest in calls... but hey, all good.
Or they will sell future contracts to cover their losses, ala Aug 24th.
I like turtles.
I like trains.
I like crocodiles.
Muppet terrorists!
I have never seen the market trade in the direction that the majority of open options suggest.
then you haven't been watching the put action in small caps.....and they are still at it.
And guess what? Life will go on, people will still enjoy themselves. Same stuff has been going on for 200 years now.
Need confirmation from Gartman's positioning now and over the next handful of sessions.
Might enter long NUGT again if we get a soft retrace to 1067ish but stick around this time for a few weeks. Picked on Russy again last few mins Friday and bailed when Spoos was hovering all over that "charts don't matter" 2070ish throughout today's session.
i am buying retail shorts for christmas and decorating the tree with hand tied ribbons with each companys' call letters. mortgage bankers last time. energy and retail this time. shld is going under. fuck you lampert for destroying great childhood memories. i just found out woolworths still exists in australia. i wonder if they have the ballon lottery for banana splits.
The level of the S&P 500 is found nowhere in the roles and responsibilities of the Federal Reserve established by Congress. That fact, while interesting, is irrelevant. The fact is that the spineless, bribery besotted political parasites have completed abdicated any and all responsibilities for monetary and fiscal policies, allowing the Federal Reserve to do whatever it wants.
• Abolish the Federal Reserve System;
• Hold banking stock and bond holders and banking executive officers completely responsible for the totality of losses even if it exceeds paid in capital and face value of bond holdings;
• Prosecute and severely punish the political parasites for accepting bribes (I.e., campaign contributions, honoraria, fees for speeches, free rides on Crony Capitalist Corporate jets, etc.),
RICO the Fed!!
Politicians will take it on the chin.Trump will have a field day on a big drop and the audit the Fed legislation would go through on that one.
Which is why it ain't gonna happen
Considering the "market" likes to screw people over so much - is it not more likely that we rally and the puts expire worthless and THEN the market crashes?
If the market spikes, A LOT of retail investors will meet a margin call they can't cover.
If the market crashes, A LOT of banks will have to pay out hughe amounts to the naked shorters.
BUT A lot of funds are also short. And they represent a lot of money also. Also, European banks also went short on the US market.
So either way, whoever wins on friday, the losses on on side will cause a crash overall.
One group will need to be sacrified. And the market needs both.
The goal will to land the market with the least amount of carnage; so flat I say.
Yeah but flat will also mean a serious margin call for the retail investors and funds.
so now there's a face and a name to the dude shorting infinite quantities of paper oil. fascinating
Gandalf's mega laxative; it will purge the bowels of Pax AMericana against its own temptations of hogging on to the debt pump, like an addict.
Wow, what a PIPE to clean the abcess against all odds. Its a scream. Nothing can stop it as its greed feeds the sword of Damocles.
Quick the fellowship of the ring to save the essential and destroy it before Mordor's Sauron...
But who is Sauron?
If only we KNEW, is it I or is it you?
Is it the Jihadist or is it his pardner in crime... ?
Every Oligarch has this question on his lips like if he awaits the sign of the pest to manifest itself.
I don't wanna die alone !
Some dream of Kolanovic !
the equivalent stock position to the option put is a short on the market. the resulting short squeeze could be interesting however if those puts were sold that adds a dimension if the market actually crashes the strike price, i want to guess these puts were sold because they are so far out of the money. the put sellers got slammed in 87, but that was before plunge protection or any of that stuff and who knows what kind of derivatives have been written, you are only looking at one tiny part of it. however if these were bought puts i have seen this happen before when the large institutions want something to happen, just like taking your stock down at expiration because most of the OI is in calls. if they want to go there, they will do it, but its impossible to know from where we sit how these positions originated. theres always someone on the otheside, if the OI is punters then they get led to the slaughter, if its institutions on the sell they could get caught with their pants down. either way things are much more complex than a few put options on the S&P
How are you playing this; if you care to share your opinion?
BTFD.
not playing it at all though i consider the possibility that closing those positions will cause a short squeeze going into year end, a lot of managers, politicians, etc. have a real interest is seeing the indexes finish the year on the upside. they are essentially flat YOY right now, so it would not take much and it would do a lot. i would worry more about January from a bearish viewpoint especially if they push them higher now on lo or no volume. i am tinkering with some gold mining stocks, they are really beaten up but you cant expect any sector to run against the market. it looks like the rate hike genie is out, and we got through that, the IMF plan for new SDRs will expand the global monetary base this next year. the headwinds are slow growth, which depends on political stimulus, and this being an election year the pols might start throwing money around. 2008 was an election year, so tread lightly. hillary published some banal crap about regulating wall street did anyone understand? Trump doesnt need to comment hes a business man. either one can be bought, so we're probably okay. back in the 90s we had a protracted period of flat returns, and some smart people said that time over a period of flat returns was really bullish, they call it consolidation in techincal terms. i think the market is going to consolidate.
Gee, thanks for reminding me of '87...lost 100k Monday through Thursday, then another 100k on Friday (even though caught a 25k winner in the last 90 seconds in the S&P 500 options pit) just to complete the weekly travesty. Made 73% back the next 3 days fortunately, and then booked a trip to the Carribean just to clear the head. Wish I had stayed....
Mournful
Edit: Please do not ask re" '89. Dr. J can fill you in on those IBM follies.
I'll believe it when I see it. The thing is so rigged it won't explode. In the meantime, I'll go back to sticking my head in the sand which is a lot more rewarding than waiting for it to blow.
Every year the Dept of Weather Manipulation seeds the clouds over Israel for the end of Sukkot, so that there is a blessing of rain to end the harvest festival. Like clock-work. So, I have been trying to understand Fischer's timing on this. December 16th...does he want the market to be as thin as possible so that every algo misfires? Or is there a special algo for holiday-thin markets? If the market screams lower nine days before Xmas, does that end the shopping season? Or is he just trying to clear the books and give every bank a better entry point for 2016? you know, buy the dip, and we'll make sure its a big dip. Or maybe he was just waiting for Hannukah to end. Yellen is just the news reader, and she's not even good at her job. btw, next Monday is the last day with any real liquidity, and it's numerology is the dread "7."
So the FED kicks the can down the road again and just prints more money and keeps buying toxic assets, then "everything is awesome".
The Deep State finances itself by gaming and front-running the markets
Dont forget opium trafficking
I'll be surprised if we sell off before the new year, the fed will be ready to buy S&Ps after the interest rate announcement and there're too many fund managers lagging the benchmark. This option expiration is definitely something to watch . . . with such a large open option position, the underlying will gravitate to that strike as traders buy the underlying so their contracts expire in the money. But immediately after that all hell could break loose. . . very interesting.
Casino for the connected. Fuck all of us as they play and if they lose, we pay, ...If they win, they keep it!
Dont worry Mr Kolanovic, you sage of the worlds future, gambling in shit that honest hard working folk depend on for fucking sustenance. The whole world over mind, you incredible specimen of human spunknationess. Seeing as such power houses of trading of others liquidity, such as yourself, guarantee, yourself, that your fucking outrageous games always pay off to the detriment of those you live amongst. Including folk like me.
Be thankful Mixy, and all those he knows, and even those beyond, all around the world you cunt, back you cunts up with a dog damn 100% of our money, while you cuntish spivs play with the very lives who allow you to live and play the way you wouldnt have any other way.
And take heart you coke addicted cunt. When it goes pear shaped, the central bank will also mark us lot of naive cunts down as yet another lot of brain dead wankers, just sitting there waiting for your ilk, and their mates, to try and milk more public funds, towards your lot of brain dead, coke addicted thrill seeking, paper hungry knobs, to cover for yet more theft, malfeasance, idiocy, corrupt, think you are going to get away with it cock sure twats.
You aint son. Tell your mates, tell your wives, tell the bosses, and tell the lot.
I want a people premium, and fucks like you cunts aint included bar paying for it.
Call it a percentage rate hike, and its coming son, is it not.
;-)
Santa Claus is coming...
on the town
I call BS. Who sold those puts? That's the real money.
Every year, i heard the same broken record. And every year, the market goes higher.
2009. 2010. 2011. 2012. 2013. 2014. 2015. Don't fight the fed.
Yea. Don't fight the Fed, rapetrain; kiss their ass out of your cowardice; Loser.
J.P. Morgan analysts wrote that the three best leading indicators for recession have been credit spreads, the shape of the yield curve and profit margins.
Here are some signs of a coming recession.
1. Investors in high-yield bonds are expecting to see their first negative return since the start of the credit crisis in 2008.
http://www.marketwatch.com/story/deteriorating-junk-bonds-flash-warning-signs-for-stocks-2015-12-07?dist=afterbell
2. Factory orders continue to drop
http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row
3. Default risk spikes
http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high
4. M&A set record
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
5. Iron ore prices tumble
http://www.marketwatch.com/story/iron-ore-prices-keep-crashing-adding-to-global-growth-fears-2015-11-30
6. Baltic dry shipping index tumbles
http://www.marketwatch.com/story/shipping-index-falls-to-all-time-low-stoking-fears-about-global-growth-2015-11-19
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
Could this be why UDN and other short ETFs have been closed?
I'm not so sure 'dollar strength' is the main driver of reduced profits. I think it is good-'ol-fashioned lack of demand---brought to you by too much DEBT and the forward pull of demand from the Keynesian playbook and fractional reserve banking. The piper always gets paid and payments begin in earnest in 2016...So dance bulltards, dance; the rude awaening is nigh...
I agree, it looks like QE has lost its pop! When looking back over history it is hard to argue with the fact that trends can simply run out of steam, lost momentum is not always sudden. Economic policies function under the same laws and because something appears to be working for a while does not guarantee its future success.
Currently the economy is slowing, not only in America, but across the world, but what many people see as a lack of momentum could be something far more disruptive and disturbing, it could be we are beginning to see attrition starting to take its toll. The article below titled, "Lack Of Momentum And The Lag Time Effect" looks at how systems can be slowly worn-down and the damage may surface only after time has pasted.
http://brucewilds.blogspot.com/2015/11/lack-of-momentum-and-lag-time-of.html