Just the Beginning

The Federal Reserve seems to have ushered in the unfathomable reality for global investors. For many a bond participants were finally forced to capitulate yesterday and today and for all intents and purposes, the old mantra “DONT FIGHT THE FED” has now been once again, solidified. Etched into the minds of many traders over the years and since we’ve been watching, since the good ole’ Greenspan days, the FRB has once again put the bond markets into submission. Today’s bond market as we suspected saw massive front end buyers unloading on the 30Y part of the curve:

This was the 2pm settle and by 4pm the (30Y) bonds were +18 basis points. Look at the 2s30s +12.3 basis points on the day!

We knew the US Equity markets couldn’t ignore this reality either and with all the heavy hitters unloading over the last few weeks, this may just be the beginning of a much larger move. Yea we know, the markets have a tendency to jump on nothing, yet we also know that this 1400 point futures drop in the Nasdaq represents an almost 9% fall off the recent highs and is about to bring in systematic sellers. We highlighted the FOMC meeting dates over the last 3 meetings displaying a decent head and shoulders formation and today, we added “ THE BEAR!”

This weeks absolute failure combined with the 0.786 reversal level and now the 0.618 level has been breached, has put us into full bear mode. The 0.382 support comes in at 14200 on the futures and that is our short term target for now.