Running out of tricks

So NY Fed williams made an appearance on CNBC and said that The Fed is watching Stock market and we are not on Autopilot when it comes to hiking rates.The trick Worked, briefly pushing Spoos,Dow and Nasdaq higher.Treasury Secretary Mnuchin spoke yesterday doing his best to talk market higher. The once proud, market leader Faang has now turned into Dead weight in the Nasdaq.Facebook -28 % YTD is one of the reasons that Fanng Trade and thus nasdaq has been the leader to the downside over the last few weeks.Mizuho telling us today that the Fanng trade is not the most held trade by funds for first time since February.Not a surprise then that Nasdaq has been trading with a heavy tone as liquidation into year end a big factor for lower prices

US yield Curve steeper today as chatter of flattener unwinds aided by a block trade in Ultras keeps longer end heavy.Next week brings a hefty amount of Supply +$150 B all in the shorter end of Curve so this too keeping a lid on prices.

Negotiations ongoing regarding Govt shutdown quite possibly a pop in Stocks if Shutdown avoided.

More Bad News

Stock markets can not catch a break .These two headlines just came across wires and are applying Further pressure on main Indicies. *APPLE MAY CUT IPHONE PRODUCTION AGAIN BY 4M UNITS: ROSENBLATT

Speaker Paul Ryan said Thursday that President Trump will not sign a stopgap spending bill over concerns about border security .Stock market scared of her own Shadow so any Bad news regardless of overall economic impact will see outsized response.

This is getting to the Point as Who is left to sell.Remember tomorrow is Quadruple witching so quite possibly this weeks selling amplified by gamma adjustments in a Holiday thinned market.Treasury Complex hasn’t respondent much to anything since earlier this morning as 2s10s still flatter on day but in middle of range.30s and ultras higher shorter end lower.The probability of a rate cut in December has all been priced out as Euro Dollars come to their senses,January 2020 showing 7% chance of rate cut.Action on the close will be watched to determine market psyche.

12-20

Fed Rate Cut probability for December Doubled to 15% on yesterdays close from 7% close on Tuesday, Market telling the fed they may have gotten yesterday’s Statement wrong. U.S. 10 year yields dipped below 2.75%, lowest levels since April, Bund yield roughly near YTD lows, and 2s10s Yield curve dipped below 10 handle into single digits. These are not signs indicative of an Expanding economy these are signs of a slowdown ahead. Dollar index down 3-4 days realizing now that the only thing propping it up is rate hikes and not growth, below is a daily chart of Dollar index, Trend Line is broken which could indicate more downside to come.

 NKY closed down 2.85%, trading at lows of day Bank of japan left policy unchanged as expected. In Europe Stocks trading lower Both Dax and Stoxx 50 at 2 year lows not much optimism to be seen. No one in a buying mood it appears as though Santa Claus rally turning in to the scrooge sell off.

 Commodities show Oil down 3.5%, Brent-3percentage, Gasoil -2.5 as demand worries starting to show up in more and more stories. Gold, Silver palladium all +1%, Copper little changed weak dollar good enough explanation for their strength. Nat Gas +4% a bullish Storage number is expected today.

 No Fed speak scheduled until the new year so if any Fed governor happens to show up for an Interview before then, it means they have something to say to the markets. Second tier data today will not move markets.

A quick take

“The Committee judges that risks to the economic outlook are roughly balanced, but will continue to monitor global economic and financial developments and assess their implications for the economic outlook.” Worries about Global Slowdown popping up in fed statement for first time in awhile indicating FED concerned.

This Along with powell saying Fed is at lower level of Neutral rates spooked markets into thinking the fed maybe moving into restrictive territory and still predicting more rate hikes.

Lastly trend is down in Stocks and outside of an announcement of QE They were likely to continue to trade lower.