Yellen, in her press conference after the FOMC meeting created a lot of confusion.  The consensus take was that she was not going to raise rates for a very long time.  This raised the question, “What does the Fed know that we do not know?”  The uncertainty caused a global sell off in stocks, run up in gold and bonds.

Last night, Yellen changed her tune.  She clearly said that she would personally like to raise rates in 2015.  She backed it up with lots of data and charts.  However,  it is still data dependent and some members of the FOMC are still very dovish.

Assuming that Yellen is able to execute what she said last night, the following should be the result in the medium-term.

• Higher U. S. stocks
• Higher emerging market’s stocks
• Higher other developed market’s stocks.
• Higher dollar
• Weaker yen
• Weaker euro
• Lower gold

In the very short-term, it is uncertain how the markets will react if and when an actual rate increase takes place.

In the very, very short-term, it is positive for stocks.

Our very, very short-term early stock market indicator is positive.

What To Do Now?

Consider reducing the hedges, there will be a separate specific post.

All buy zones are now active.  Consider lightly scaling in stocks or ETFs in the lower one-quarter (1/4) of the buy zones.  Please note that if a stock or ETF has fallen below the lower band of the buy zone, it is no longer a buy unless there is a new post. 

Consider starting to book profits on shorts, there will be specific posts.

Still continue to hold a fair amount of cash.

Gold futures are at $1142, silver futures are at $15.03, and oil futures are $45.17.

S&P 500 resistance levels are 1962, 2000, and 2017; support levels are 1860, 1838, and 1800.

DJIA futures are up 248 points.

Lately oil and stock markets across the globe have been highly co-related.

Yesterday, there was a picture perfect bullish set up for oil.  From a very short-term fundamental perspective, on Tuesday evening, API reported much higher than expected draw.  Yesterday DOE reported much higher than expected draw.

From a technical perspective, oil had been gaining momentum to the upside in a wedge formation.  After the DOE number, oil broke out to the upside from the wedge on high volume.

Such combined very short-term fundamental and technical bullish set ups are rare.  It was almost a no brainer from the setup that oil would go to $50.  We did not issue a buy call because we also take into account risk, and the risk level was high enough to prevent a buy call.

Bulls jumped enmass.  Then came the epic failure.  As shown on the chart, oil plunged in minutes.  The stock market followed.

Gold and bonds are moving up on uncertainty.

Our very, very short-term early stock market indicator is negative.

What To Do Now?

Janet Yellen will give a very important speech later today.  Let us see if she clears up the confusion that she has created.  In the meanwhile, it is best to do nothing unless there is a specific post.  If you have been following along, you should be holding a large amount of cash and/or hedges.  It is important to continue to hold a large amount of cash so that you can capture opportunities that may come along over the next few weeks.

OCTOBER IS SEASONALLY THE BEST MONTH OF THE YEAR TO BUY AND BUY TO COVER. 

We have significant short positions in ZYX Short Sell Change Alert.  The plan will be to take large profits over the  next few weeks.

On the long side, the plan will be to deploy some of the cash over the next few weeks on down spikes.

Gold futures are at $1140, silver futures are at $14.83, and oil futures are $44.19.

S&P 500 resistance levels are 1962, 2000, and 2017; support levels are 1860, 1838, and 1800.

DJIA futures are down 169 points.

In yesterday’s morning capsule we shared with you:

Today has indications that the day may shape up as a ‘sell everything day’.  Such days are rare.  Assuming the foregoing happens, it typically results in one of the following two scenarios:

• Selling removes the weak hands from the markets and the correction ends offering great buying opportunities.

• It is the start of a new leg down offering a great shorting opportunity.

Clarity was developing until the last hour when aggressive buying kicked in.  On down days, short covering in the last hour is common.  But this was very little short covering, it was real buying.

Our algorithms would have reached a conclusion about the future market direction if the selling would have continued in the last hour.  Now, the direction is muddled again.

Last night China Manufacturing Index hit a six-year low.   Caixin China Manufacturing PMI came at 47.0 vs. 47.5 consensus.  Stock and oil futures immediately dropped.

Around midnight, markets across the world started seeing buying.  As dawn approached, buying became aggressive.

Gold, which first ticked down on China data, has seen aggressive buying.

Interest rates are slightly ticking up after falling yesterday.

Oil is range bound awaiting DOE Inventory Data which will be released at 10:30 am ET.  API data show a big drop; oil first jumped on the news but then gave up gains on poor China data.

Our very, very short-term early stock market indicator is positive.

What To Do Now?

Until some clarity develops, it is best to do nothing unless there is a specific post.  It is important to keep a fair amount of powder dry for upcoming opportunities.

Gold futures are at $1129, silver futures are at $14.83, and oil futures are $46.50.

S&P 500 resistance levels are 1962, 2000, and 2017; support levels are 1920, 1860, and 1838.

DJIA futures are down 17 points.

Today has indications that the day may shape up as a ‘sell everything day’.  Such days are rare.  Assuming the foregoing happens, it typically results in one of the following two scenarios:

• Selling removes the weak hands from the markets and the correction ends offering great buying opportunities.
• It is the start of a new leg down offering a great shorting opportunity.

Stocks, bonds, gold, oil, and currencies may sell off.

Hillary Clinton is offering a plan to stop prescription drug price gouging.  This may put significant pressure on a segment of the stock market.

Our very, very short-term early stock market indicator is negative.

What To Do Now?

Discretion is the better part of valor.  Assuming you have been following our calls, consider keeping the powder dry to take advantage of significant up coming opportunities.

Gold futures are at $1121, silver futures are at $14.77, and oil futures are $45.44.

S&P 500 resistance levels are 1962, 2000, and 2017; support levels are 1920, 1862, and 1838.

DJIA futures are down 278 points.

Markets are fickle.  After Friday’s drubbing, France credit was downgraded.   Overnight Australian market opened much lower.  There were expectations of the U. S. market and Europe to open lower.  However  a new thesis has generated a lot of optimism this morning.  The thesis is that Europe and Japan will now ease because the Fed did not increase the rate.

Also from various sources is appears that Fed was closer to raising rates than it shows on the record.

In Greece, Tsipras won with a larger majority than anticipated.  This is positive because the presumption is Tsipras will now push through reforms.  At least for the time being, Greece risk is off the table.

The optimism from stocks has spilled over to oil and is proving negative for gold.  For oil we have switched over to November contract because of higher liquidity.

Interest rates are range bound.

Our very, very short-term early stock market indicator is positive but can quickly turn down.

What To Do Now?

Markets need more time to digest what the Fed is up to.  Until the real reactions of the markets are known, it is prudent to do nothing unless there is a specific post.

Gold futures are at $1133, silver futures are at $15.15, and oil futures are $46.26.

S&P 500 resistance levels are 2000, 2017, and 2038; support levels are 1920, 1860, and 18.38.

DJIA futures are up 71  points.