About an hour before the cash markets opened yesterday, we observed that crude light was closing in on our long-held 42.51 target. It bounced at 42.63 and was on its way higher when stocks opened trading, prompting us to write:
The bounce has begun, even though CL came up a few cents shy of 42.51. Stops are advised, as a premature bounce sometimes means one last leg down.
We also noted how much of CL’s decline had been conducted in the after-hours, so as not to disturb stocks’ continuing rally. Guess what?
We also noted as the market opened that USDJPY had dipped below the gray channel bottom for the first time since Feb 26. The degree to which is was allowed to reset would depend on how stocks reacted to CL’s decline and subsequent bounce.
A strong response would allow USDJPY to decline during market hours; a weak or lackluster response would require it to wait until tonight or, as we discussed yesterday, a reaction to the Fed’s statement tomorrow.
Stocks started to falter, so USDJPY was brought right back into the gray channel — and, the falling red channel was broken — for the remainder of the cash session. USDJPY was not allowed to decline to the white channel midline until after stocks had closed for the day.
If the above aren’t grounds for suspicion (if not proof) that these are the most heavily manipulated markets in memory, how about VIX’s actions this morning?
A 4-point SPX decline in the opening minutes was enough to prompt the Fed’s traders to push the panic button, sending VIX plunging from yesterday’s 15.96 close to 13.69 in the first three minutes of “trading.”
Oil’s decline has been a godsend for the Fed, which has been struggling to find a way to keep inflation and thus interest rates low in the face of improving headlines. But, it isn’t without repercussions.
The very banks whose bidding the Fed does on a daily basis are rather exposed to oil’s fortunes. So, we rather expect that CL has reached a sweet spot and, like USDJPY, EURUSD, VIX, ZN, etc., will be utilized when needed to nudge the “market” in one direction or the other.
This being a FOMC announcement and press conference day, we don’t advise trading. SPX typically follows a pattern of consolidation, putting in a triangle of some sort before a very brief and sharp correction, which is then followed by aggressive USDJPY ramping and VIX monkey-hammering that erases all losses and leaves it higher for the day.
But, as we’ve already seen, there is a great deal of manipulation that occurs on these days. That doesn’t mean, however, that we won’t offer some thoughts on likely moves.
continued for members…
Sorry, this content is for members only.
Already a member? Login below…