Post Fed Musings

A lot of soft language came out of the Federal Reserve today, as expected actually. You will probably see a lot of nit picking regarding the actual statements presented by Yellen today, i.e. what does ‘transitory’ mean or how being ‘patient’ exactly chimes with the interest hike schedule set for next year. That’s all a lot of huey and I suggest you quite wasting your time interpreting FOMC tea leafs as the Mole is going to break it down for you:

• We have seen crude prices being cut in half in less than half a year. Do you really think that was coincidence and natural market forces were at work? This was nothing but an economic hit job taken out on Putin.
• They’ve now managed to not only cut Russia’s core energy revenues by half but they also managed to blow up the Ruble in the process, up to the point where trading was suspended yesterday.
• And that certainly got Putin’s attention! Imagine the scene where his Swiss bankers very politely explain that Russia’s Ruble denominated assets are no longer margin collateral for trades or able to be used for wire transfers out of the country. I mean you’d have to think some of the top guys over there will be facing margin calls over long bets on western exchanges or USD denominated debt secured by worthless RUB assets. Ouch.
• This is all part of what the British once referred to as the ‘Great Game’ and there was simply no way that our hapless Fed sock puppet Yellen was about to get in the way of the concerted bitch slapping of Putin initiated by the State Department.
• Bottom line is that most likely we won’t see any changes to the interest rate hike schedule outlined for 2015 – it will more or less proceed as expected. However by generating doubt and confusion today it left enough space for imagination and thus keep the thumb screws on Putin.

And that’s how the game is being played, ratlings! I only feel bad for all those Russians who are caught in the middle – they are an acquired taste but I happen to really like the Russian people. You can say a lot about them but they are not hypocrites and they mean business – that means a lot in my book.

Anyway this battle clearly went to Obama but winning the war is completely different story. See, as a born German there’s one lesson they drilled into our heads when we were young: Never ever under estimate the Russian bear. Those guys are used to dealing with hardship and Putin’s popularity is as high as ever – the current situation may even give it a little boost. In the long term the Russians are going to dig themselves out of the current hole but this economic hit job orchestrated by the West (i.e. the U.S. and it’s Western alleys) will not be forgotten for a very long long time. I never understood why the West is so hellbent on making an enemy out of Putin.

But then again I’m a very small player and whoever is pulling the strings is fully aware of the points I’m highlighting here. I just hope the situation doesn’t escalate. The world is better off without a Russian nation thrown into  a deep recession, alienated from prior economic partners, and feeling threatened militarily. That could quickly get out of hand – black swan anyone? Never ever under estimate the unexpected consequences of your actions.

So real quick a few snapshots of some key markets. The Dollar most definitely positive here and we may just hold that 25-day SMA now. Let’s see what tomorrow brings but I’m pretty stoked about this one.

The spoos still bumbling about below their 100-hour SMA. We are at the 100-day but this candle is not exactly looking bearish. So there is potential for more ugliness.

Which is a bit surprising as we had solid buying mojo today – look here the UVOL/DVOL plots – green and very organized it seems. So maybe this is a last drop before it’s being punched higher?

I wish I could offer a definitive yay or nay here – the advancing/declining NYSE ratios also look positive. So I would have to conclude that we have a reasonable chance for at least an attempt to push this puppy higher. No setup opportunities though here. I tried a lottery ticket long yesterday and quite frankly this is not important enough for me to throw any more capital into this volatile tape.

Some more thoughts on crude below for my intrepid subs:

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Cheers,