The Emperor Has No Clothes

Wham. The dollar spiked to 80.58. Gold and oil continue to slide. Europe is quite red, the FTSE holding up but hovering along the flat line. The 10-year bond is up in yield, and charts are being posted showing a developing head and shoulders pattern in the S&P e-mini. ISM data comes out at 10 am EST.

But the biggest news of the day is this:

(MARKETWATCH): The Federal Reserve may have to accept the market's view that any taper is closely tied to the expectations of the first rate hike, said James Bullard, the president of the St. Louis Fed Bank, on Friday.

The Fed has just admitted to that it does not control the market . . . that the market controls it. The emperor has no clothes.

Now if they can just go away. Elsewhere, Draghi and the ECB may have a confirmed case of deflation on their hands, according to Bloomberg.

Draghi’s Deflation Risk Complicates Recovery: Euro Credit

And in Japan, Abenomics seems to be doing a fine job of mucking up everything: Nissan just slashed their full-year profit forecast by 15%. So much for central banks saving the world.

Rather than hit the sell button, I'm seeing a potential double bottom in the e-mini contract if 1751.25 holds. There is a 1:1 Fib extension target at 1750 on the cash S&P that may start lending support today. But yesterday was a bad close. The best thing to do is be patient for the ISM number and see if 1751.25 holds on the futures.

I'm inclined to be a buyer at 1750 with 1740.50 as a stop. If the market smashed through the 1745 volume shelf, perhaps the head and shoulders pattern is correct. There are Elliott wave patterns that suggest the same thing. But don't expect the naked Fed to save anything.