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

Gold has has been one of the best months for gold in terms of monthly performance in the last 10 years. Bloomberg confirms that today.

"With the macro backdrop more vulnerable today than at any time since the financial crisis, and the S&P 500 and NASDAQ still near all-time highs, we anticipate a downside move to 1900 on the S&P within the first two months of the year. We reiterate our view that Crude and Energy remain structurally broken and possess significant downside from current levels which will only agitate and exacerbate the ongoing collaps."

The debt valuation adjustment, or DVA, will no longer be included in net income, according to revisions to the fair-value measurement standard published by the Financial Accounting Standards Board Tuesday.  The DVA rule increased net income when a bank’s bonds tanked, on the theory that the firm could buy back its bonds at a lower price and benefit from the decline in value.

As Wall Street axioms (Santa rally, January effect, as goes January etc.) are rapidly falling by the wayside at the start of 2016, following a chaotic but return-less 2015, the UBS analysts who correctly forecast last year's volatility are out with their forecast for 2016. It's simple - Sell Stocks, Buy Gold... expect a Fed u-turn.