ES Journal Archive (2006 - 2008)
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End of the Day Analysis:
Wallstreet can't help itself but remove risk from its positions, by covering its shorts. As pointed out the FED meeting does pose a risk.
Wallstreet would have fared better, if they managed another 250 point swoon in the Dow, but none had the balls to do it. Some may have tried, but ultimately the market was too short, for the risks inherent from the FED meeting.
Spinmeisters from tommorrows statement will try to sway it in their favor. Apart from a overt move which is doubtful especially with such a large rally today.
Believe it or not the market has worked towards the FED's desires, the carry trade is being unwound and the dollar is being speculated less against. Bond yields have come down, which is very desirable for financing of the current debt and the future spending implications of our military escapades.
Since panic seems to have left the market, the FED is more apt to reiterate the same shpeal. Inflation hawks, maybe a word towards expected moves in the future, but it wont be enough for the market tommorrow. The market wants a interest rate cut. And even if the FED does telegraph that they will cut in the month of October as 'sheryl' on the street has put out today, that leaves a few months to run the stops of the Bulls.
Wallstreet can't help itself but remove risk from its positions, by covering its shorts. As pointed out the FED meeting does pose a risk.
Wallstreet would have fared better, if they managed another 250 point swoon in the Dow, but none had the balls to do it. Some may have tried, but ultimately the market was too short, for the risks inherent from the FED meeting.
Spinmeisters from tommorrows statement will try to sway it in their favor. Apart from a overt move which is doubtful especially with such a large rally today.
Believe it or not the market has worked towards the FED's desires, the carry trade is being unwound and the dollar is being speculated less against. Bond yields have come down, which is very desirable for financing of the current debt and the future spending implications of our military escapades.
Since panic seems to have left the market, the FED is more apt to reiterate the same shpeal. Inflation hawks, maybe a word towards expected moves in the future, but it wont be enough for the market tommorrow. The market wants a interest rate cut. And even if the FED does telegraph that they will cut in the month of October as 'sheryl' on the street has put out today, that leaves a few months to run the stops of the Bulls.
No chance of a change in rates, but the market will be looking for a change in the wording of the statement that could be interpreted as opening the door for a rate cut down the road. Here is the previous statement and where to look for changes:
For immediate release
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent. [ Any change to that first sentence would be a major surprise!!! ]
Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector.
They should note that housing has gotten worse, but they will more likely gloss over that by keeping this sentence unchanged
The economy seems likely to continue to expand at a moderate pace over coming quarters.
Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.
[ Hard to change this wording. There has been no real improvement in the inflation data. ]
In these circumstances, the Committee's predominant policy concern
[ Here is where it gets interesting. Is their main concern still inflation? Will they mention that credit spreads have widened significantly which has been a de facto interest rate hike for much of the economy and has the potential to put a drag on economic growth? This is where the market will be looking for a change in the wording! ]
remains the risk that inflation will fail to moderate as expected.
My suggestion for Mr wishywashy is to keep the predominant policy concern inflation, but insert a "secondary" concern that credit tightening in the market may harm economic growth. This will let the Fed remain vigilant on inflation but will also let the market hope for a rate cut and trade everything up (stocks and bonds).
Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
Voting for the FOMC monetary policy action were: Jaxon
For immediate release
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent. [ Any change to that first sentence would be a major surprise!!! ]
Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector.
They should note that housing has gotten worse, but they will more likely gloss over that by keeping this sentence unchanged
The economy seems likely to continue to expand at a moderate pace over coming quarters.
Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.
[ Hard to change this wording. There has been no real improvement in the inflation data. ]
In these circumstances, the Committee's predominant policy concern
[ Here is where it gets interesting. Is their main concern still inflation? Will they mention that credit spreads have widened significantly which has been a de facto interest rate hike for much of the economy and has the potential to put a drag on economic growth? This is where the market will be looking for a change in the wording! ]
remains the risk that inflation will fail to moderate as expected.
My suggestion for Mr wishywashy is to keep the predominant policy concern inflation, but insert a "secondary" concern that credit tightening in the market may harm economic growth. This will let the Fed remain vigilant on inflation but will also let the market hope for a rate cut and trade everything up (stocks and bonds).
Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
Voting for the FOMC monetary policy action were: Jaxon
We could also say that UBS was already long and is now trying to get out of these stock positions?
(I'm just catching up to all the posts now) I'll be live during RTH for the first time in 2 weeks...unfortunate timing for my vacation with the increased volatility and chances of profits. Watch as the market is rangebound all day, even with the fed announcement.
Since most markets are correlated, I will mention here that I am long DAX from earlier on, so far it looks like a triple bottom, daily/240 histogram is bullish IMO, considering monthly chart of S&P500 and DAX seasonality would point to resurrection of buyers getting closer to Autumn, weekly divergence in the S&P500 has probably completed now, it got very close within the range I expected price to pull back to.
Posting a 240 minute chart of DAX, sorry for posting DAX, not ES
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1558609>
Posting a 240 minute chart of DAX, sorry for posting DAX, not ES
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1558609>
for your perusal,
"the following is all a quote from the email I recieved from mypivots.com..."
There's a Fed rate announcement at 2pm EST on Tuesday
7 August 2007. On the previous Fed Day the FOMC left the rates unchanged at 5.25%.
To see how the E-mini S&P500 contract reacted to this lack of change have a look at the chart on this page:
http://www.mypivots.com/articles/articles.aspx?artnum=11
Use the Pages link at the bottom of that page to look at previous year's charts for Fed Days.
The markets have discounted an 87.6% probability of no rate change and a 12.4% probability for a quarter point cut.
"END OF QUOTE"
"the following is all a quote from the email I recieved from mypivots.com..."
There's a Fed rate announcement at 2pm EST on Tuesday
7 August 2007. On the previous Fed Day the FOMC left the rates unchanged at 5.25%.
To see how the E-mini S&P500 contract reacted to this lack of change have a look at the chart on this page:
http://www.mypivots.com/articles/articles.aspx?artnum=11
Use the Pages link at the bottom of that page to look at previous year's charts for Fed Days.
The markets have discounted an 87.6% probability of no rate change and a 12.4% probability for a quarter point cut.
"END OF QUOTE"
Looks like a Wyckoff upthrust.
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