Tic, Toc, Tic, Toc...T-7 hours

Tic, toc, tic, toc….and so we wait….for ‘The Decision’…..I mean it’s like a death by a thousands cuts…..Get on with it already…..so yesterday the mkts were a bit excited in the morning….futures pointed to a higher opening and the tone was not the same as the one on Monday, or Friday, or Thursday or Wednesday of last week (or in fact for most of the month…)….it was a bit upbeat and a bit more positive and a bit edgy…..wanting so badly to go higher, but held back by the fear of it all…….the action since early October has bordered on psychotic – the breakdown in the mkt – a breakdown that was swift & violent (at times) – has yet to find support – never mind begin to recover!   As noted in yesterday’s comments – while the ‘mkt’ is not yet in bear territory – there are a bunch of sectors that are and the rest are knocking on the door…….So while you can say that the mkt is still in correction mode – a move defined by 10% - 20% lower from the highs – that would not really be the truth….well it would be the truth if you stuck to that definition – but take a look at your portfolio and it tells a different story.

So the Dow ended the day well off its highs – swinging 411 pts from low to high to end the day +82 pts or 0.35%, the S&P swung 45 pts from low to high ending the day flat while the Nasdaq swung 115 pts ending the day +30 or adding 0.38%......Oil – (a story of late) continued to get pummeled yesterday,  ending the day down another $3.20 or 6.4% landing at 45.91 by the time the mkts closed…..oil has now dropped over 40% from the October high of $76.16/barrel in a stunning reversal of fortune for OPEC, the Saudi’s the Russians and even the Americans!  The energy sector tells THAT story….with the XLE (Energy ETF) getting pounded with each passing day….now down 24% as the passive investing strategies can’t get out of their own way….but that is another story.

The VIX – (fear index) is up a whopping 123% in that same time frame – in a move that screams concern……It is though, at a level (25.03) that appears to be the top……I mean look at the chart…..it rallied to here in early October only to fall back to $16.50 to rally again to fall back again and now to rally right up to that level again – almost as if there is a brick wall there holding it back……but the chart does reveal 4 or 5 attempts at piercing it – so one of two things will happen – and that will happen today: 

Either we will be disappointed in the FED and watch the mkt fall while the VIX spikes higher OR we will embrace their new found interpretation of the data points and welcome the expected move higher (today) while they pull back from any specific schedule of 2019 increases.  It will also depend on HOW they present this…because if they sound to dovish – the mkts could interpret that as a negative – meaning ‘it ain’t all a bed of roses’…and BOOOOOMMM!  So he is walking a tightrope – as far as the mkt is concerned – and btw – I’m not even sure the mkt knows what it wants him to say……as it remains clouded and confused.    

If the FED does as what most people now think will happen – he will raise rates today (as expected) so no surprise, and he will go completely dovish for 2019!  And this will cause an initial surge in the mkt as the street then picks apart every word he said and how he said it.  Was he smiling when he spoke or did he have a look of concern on his face?  Was he sweating?  How much water did he drink during the press conference?  Did he stutter?  Was he confident in his presentation?  Did anyone from the press knock him off his soapbox?  Etc……… Completely dovish means going from the ‘ almost guaranteed 2019 - 3 hike mode’ to  a ‘2019 wait and see mode’.  A mode that does NOT take hikes off the table completely, but rather allows the FED and investors to sit back, catch your breath, assess the damage, re-examine the macro data, give Petey Navarro and Stevey Mnuchin time to negotiate a ‘trade solution’ with China , allow the new congress to get seated so we can see what THAT really looks like, watch the unfolding drama develop in the UK and across the EU (European Union) as those two come closer to a divorce, wonder out loud if the Italians are ever gonna get their sh*t together, see what happens to the EU economy now that Uncle Mario (Draghi) - President of the ECB (European Central Bank) – confirmed that they too will cease their QE (Quantitative Easing) program begun years ago as the global financial system began to circle the drain.  And don’t forget about the Mid-East and the rising supply of crude oil, accelerating a swift decline in oil prices – thanks to more efficient production, and the discovery that the US has more oil than we know what to do with!  HELLO??? Anybody home? 

But yeah! – the mkt action is all about the FED!  GET OVER YOURSELF…….!  As I said yesterday – while the FED has held your hand for a decade, given out Kolonopin, Zoloft, and a host of opioids - they pulled out the couch and had a constant therapy session with you – its time to move on……Look – back before Greenspan created this mess – and yes HE is the one that planted the seeds that brought the world to its knees – The FED never gave you the time of day…they did their job and the mkt had to figure it out……Period…..but I get it – It is the 21st century – we are supposed to be ‘in touch’ with who we are and how we feel at all times……..so let’s get on with it – the clock IS ticking……

Overnight – Asian mkts ended their day mixed – held in check by what the FED will say and do. On Thursday – the BoJ (Bank of Japan) is due to announce their policy decision followed by a press briefing from BoJ Governor Kuroda.   The main attraction today in Japan  was the debut (the IPO) of Softbank Corp – a 2.65 tril YEN IPO….(that’s $23.6 bil) the largest ever IPO in Japan and second in line behind China’s Alibaba when they debuted at $25 bil in 2014.  It was not what they wanted at all.  The company came at 1500 YEN ($13.36) and closed 14.5% LOWER on the day – unable to hold the IPO price – and when it failed – the TSUNAMI hit it like a ton of bricks…….Retail investors that represented nearly 90% of the deal panicked and rushed the door sending that stock lower before the sun set……Across the region In China and Australia – energy names continued to get slammed…… – PetroChina – 3.2%, China Petroleum & Chemical Corp – 4.85%, Origin Energy – 5.6% and Woodside Petroleum – 1.8% as these names follow other global energy companies lower.   China’s – Central Economic and Working Conference is under way and it is here that investors expect them to announce plans to ‘reset growth and reform objectives’ and this may give the world an inside look on what’s next for China and US/Sino trade.  Japan -0.6%,  Hong Kong +0.20%, China – 1.19% and Australia – 0.16%.

In Europe – mkts there are all in the green.  BoE (Bank of England) is due to announce their rate and policy decision on  Thursday as well – but for today – all eyes and ears on the FED.  Word out of Rome has it that they have reached an ‘informal agreement’ with the European Commission and that is helping the banks across the zone.  Italian banks benefitting the most – but I caution you – it is as they noted an INFORMAL AGREEMENT.   So nothing is cast in cement – yet.  UK inflation fell to a 2 yr low and that is being taken as a positive in light of the coming divorce between the UK and the EU.  FTSE +0.96%, CAC 40 + 0.61%, DAX + 0.75%, EUROSTOXX +0.70%, SPAIN + 0.85% and ITALY +1.84%.

S&P futures are UP……21 pts!  Dow futures are up nearly 200 pts, Nasdaq is tacking on 53 pts and the Russell is up 11 pts as the early birds are placing their bets…….this morning there is rising speculation that the FED could pause even today……..and they could hide behind collapsing oil prices and the ‘deflationary effects’ it could have on the global economy…..especially if they can also prove (or justify) that US and global economic activity is waning……..toss in the shots fired from the WH over Twitter by @RealDonaldTrump telling Papa Jay (Powell) to ‘tread carefully in order not to make yet another mistake’ while the WSJ felt compelled to also support a ‘no rate hike’ stance.  Oh boy…the pressure is building….WWJD?  (What Will Jay Do?).  

Eco data today – not that it makes a real difference – includes Mortgage apps – which fell a stunning 5.8%!.  Existing home sales are expected to show -0.4% m/m at an annual rate of 5.2 mil sales.  At 2 pm we will hear THE NEWS…..will rates remain in the 2%-2.25% or will they now be 2.25% - 2.5%?   Oh the drama of it all…..Remember that rates are still well below normal – so even at this rate they remain stimulative.  Listen for the guidance…

S&P futures are up 21 and 2.560 – Watch to see if we breach yesterday’s high at 2,573 – if we do (with any commitment) then a swift move up another 25 pts will take us to 2600 – just a big fat round number – but it is psychological……Will it present resistance or will we blow right thru that too as Santa prepares his sleigh…will it be full of toys or will he bring coal?  Have you been a good boy/girl?