FOMC 10Aug2010

[Timmy]

Anyone have any thoughts on the FOMC statement?
Expectations, direction the market to take etc?

Speak now - no hindsight calls tomorrow!

 

[professor_frink]

well being a Fed day you'd be mad to be looking for a short on the open tonight.

I'd like to see a gap down on the open for a fade(if I'm awake that is). If we close up tomorrow I'd be inclined to flip it for a quick short, but would do it on reduced size, there still appears to be a fair bit of strength in the market, the shorts really seem to be struggling to mark it down for any length of time at the moment

And if we see some follow through over the next week, then IMO we'll see a test of the April highs at some stage during the year(that's my random long term punt for today!)

And I'll tack on that if the market doesn't go up or down, it's most likely to track sidewards. That way no matter what happens tomorrow I'll just quote this part of the post and tell you how right I was

 

[professor_frink]

uh oh, even CNBC are onto it

http://www.cnbc.com/id/38626289

Probably makes a good case for a fade now. Back under my rock I go:goodnight

 

[ginar]

uh oh, even CNBC are onto it

http://www.cnbc.com/id/38626289

Probably makes a good case for a fade now. Back under my rock I go:goodnight

Its tough when you second guess your second guess , price action is king

The moves normally come leading into 30 mins to release , most FOMC days i dont bother watching till then


find intraday ES charts of previous fed days here ..... http://www.mypivots.com/Trading/FedDays

 

[waza1960]

My guess is that the markets will move lower after the FOMC statement.
I feel the markets are overextended and that after Fridays poor Employment figure the FOMC statement will not provide the reassurance the maket is looking for.
BTW this is a guess only not to be traded upon.

 

[Timmy]

Thanks all. The most definitive call I have seen so far was some guy who was joking that he wasn't expecting a rate hike from the meeting. Cracked me up.

 

[Broadway]

Imo, sentiment recently is up, so if it dips and finds good volume then I would consider a long. Brave to hold a trade going into the announcement.

good luck.

 

[Timmy]

Here are two sources to help understand the the FOMC statement.

Great 'cheat sheets'.

The Aleph Blog: Redacted Version of the August 2010 FOMC Statement
http://alephblog.com/2010/08/10/red..._campaign=Feed:+TheAlephBlog+(The+Aleph+Blog)

and

The Big Picture blog: Comparing FOMC Statements
http://www.ritholtz.com/blog/2010/08/comparing-fomc-statements/

-----------

OK, so now what happens?

I think the ushering in of the reinvestment of principal is not only significant in itself, but also the speed with which is seemed to go from chatter in the market to implementation. If I were a fund manager I would be paying close attention to talk about further QE and other potential actions ...

 

[Mr Z]

QEII and a liquidity driven rally in time for the mid term elections IMO. Fundamentals be damned this will be a liquidity driven rally with a hang over next year. In 2011 I am expecting "sell in May" to be the best option, US summer 2011 looks bleak to me at this distance and I expect to be a significant cash holder by then. Maybe it all falls apart this year but too many people are calling it for my taste. JMO FWIW.

 

[Timmy]

QEII and a liquidity driven rally in time for the mid term elections IMO.

I wonder if this is the first step in the softening up process, get the markets talking again about QE2?

This out on the WSJ website about 3 hours ago.

Fed Split on Move to Bolster Sluggish Economy
http://online.wsj.com/article/SB10001424052748703589804575446262796725120.html

It is mainly about the Aug 10 meeting, but some tidbits at the end of the article:

Now the internal debate turns to the future, particularly whether to do more, and if so whether to make small or large steps.
...
One thing is clear: Mr. Bernanke, though striving for consensus, is determined to avoid mistakes of past central bankers that created devastating bouts of deflation. As a Princeton professor in the 1990s, Mr. Bernanke lectured Japanese officials for being too timid about combating deflation. And in now-famous remarks he delivered as a Fed governor at a 90th birthday celebration for Milton Friedman in 2002, Mr. Bernanke promised the Fed would never allow a repeat of the deflation of the 1930s.

"The worst outcome for him personally would be to let something like deflation get under way on his watch," says Alfred Broaddus, the former president of the Richmond Fed who served alongside Mr. Bernanke from 2002 until 2005. "He will respond forcefully to evidence that the risk of a deflationary process getting under way is rising materially. He won't be ambivalent."

 

[Mr Z]

I dunno Timmy but it is going to have to be a short sharp shock from here for them to hit the November mid terms with a happy face. There are some big plans being bandied around re Fannie, Freddie and mortgages... basically refinancing the whole country at a lower rate and forgiving debt (WTF)! LOL that might just be the catalyst for panic not a rally! Silly things have been mooted, no idea how credible it all is but it is out there. It sounds fantasy land but this is the US. Maybe that is the debate... what says stimulus and what says get the "Packer whacker" and a big syringe of adrenalin because we are doomed! They may be sweating the message they send with this next move.

worried that a decision to reinvest mortgage proceeds into Treasurys would confuse investors and lead many to believe the Fed was paving the way to resume major purchases before it had decided to do so. An abrupt change in stance, he argued, could lead the public to believe the Fed was more worried about the economy than it really was.

Key concept really! They may just be damned if they do and damned if they don't.

I kinda amuses me that they think they have staved off depression by borrowing a trillion $ and throwing it into a still failing economy buying dog parks, street repaving and the like. Hardly nation building stuff! Once upon a time it was grandiose infrastructure, dams, rail etc etc... now?!

I wonder what QEII will do?!

 

[Timmy]

My initial thoughts on this article, and the stuff at the end about Bernanke's determination is to ask if this is starting to get the ball rolling on QE2, or if it is just an article in the paper to be read at face value?

I know there are 'signals' that are sent out with these sorts of articles ... nothing secretive or conspiracy-like, just that these sort of things are read in certain ways. Problem I have is I have no idea if this article is meant to be read in that way ... wouldn't have a clue LOL. Have to see what sort of reaction it gets (if any).

Then it occurs to me that if this article is the preliminary to get the QE2 idea out there and being discussed and then no further QE comes of it (and I think any more QE, if it comes, is some way off - months), then there could well be a sell-off if some have started to build longs expecting a liquidity rally.

Then I think its all too hard & I might be best just to go back to my charts ...

 

[Mr Z]

Yes... often they are trial balloons seeking market reaction. If you see a theme across a few good sources you can bet that pet journos are being fed ideas from up on high. The equivalent of our political leaks, it is hard to know what will fly, I suggest that the ideas floating around when the market gains traction will be the winners. They appear to be having trouble gaining traction... the federal open mouth committee are not what they once where IMO. It is possible that the market will vote down all attempts here... that really says that the Fed is out of ammo. Hard to imagine but I guess those calling a 2010 crash are betting on it! I am not so certain that we jump outta windows just yet, it pays large parts of this market to play the game, their bonuses are depending on it and after all its not their money on the line at the end of the day. Maybe next year or (impressive base drum solo) 2012 is the "end of their world". I am kinda backing the "life in the old girl yet" view... FWIW.

 

[Timmy]

Yes... often they are trial balloons seeking market reaction.

Thank-you Mr Z, that is the idea I was trying to convey (& doing a really bad job of....).

If the purpose of that WSJ article was as a trial balloon it appears to be having effect, loads of chat on the MSM and blogs etc. about QE2. The two days of awfully weak housing numbers (well below low expectations) are fuelling the chatter too.

Oh to be a fly on the wall at Jackson Hole this weekend (and fingers(wings?) crossed no-one brings the insecticide).