Waiting In The Grass On Fed Day, Schiff Still So Wrong

Fed day. QE3 scheduled to end today. It feels as if the market has frontrun the Fed -- was thinking yesterday felt like short covering and laughed when I saw this chart on the daily recap at Zero Hedge, one of the best things they publish each day.

Source: Zero Hedge

NYSE ticks and A/Ds were going nuts all day which made me wish I hadn't dumped the SPY 196 calls in the morning. But yet again there was no volume. So I was somewhat relieved to find some visual proof that at least the Russell was frantically being "covered."

No one wanted the market at the lows. The S&P stalled twice at the 23.6 and 38% retracement levels long enough to require two opening gap ups then a third to get above the 61.8% and a fourth to clear the 50dma. Pathetic.

Pathetic is what some of the 130 hedge funds that hold the Facebook were thinking last night when it was revealed on the earnings conference call that the company had accounted for $15 billion out of the $19 billion purchase of Whatsapp as GOODWILL.

The stock sold off 12% and traded below $72 at one point. That's equivalent to the S&P revisiting the 1820.66 lows in 1 1/2 hours.

From an ad standpoint I do think the Facebook is one of the most compelling media buys out there. It remains to be seen, however, just how savvy its CEO really is.

Today we'll see how savvy the markets have been -- whether the markets have "known" something about the Fed statement or not. Or whether they're savvy in a completely different way . . .

I tend to go with the latter. The wisdom of the market is often far beyond our ken, many times only observable long after the fact.

The above internal trend line (love them) jumped out at me only after yesterday's close and was a real ah-ha moment. There may have been a larger plan all along.

Having closed above the 78.6% retracement sets up a possible run to new all-time highs. But from current levels or lower ones? That is the question that drives me now.

Credit is not confirming the rise, nor is energy. New highs were reached in the overnight futures session. A/Ds look great. I will sit still until the market reacts to the Fed decision (or doesn't).

My UVXY position will let me buy a greater number of SPY calls the next time there is an opportunity. Until then I wait in the grass patiently.

Elsewhere, I did get word back from Erica Blomgren regarding the language the Riksbank used when explaining the interest rate cut to zero. As expected, they avoided the D word:

Guys like Peter Schiff think low interest rates mean inflation, that gold will suddenly head to $5,000 or some such nonsense. They would be wrong.

Gold is an asset just like any other one that is priced in dollars. As deflation slowly takes hold of a global financial system that runs on credit and debt, it will be the dirty secret of fractional-reserve banking that will cause a short squeeze not in gold but in dollars. Gold will fall along with every other asset priced in dollars (or beholden to dollars via trade) as assets are desperately sold to create ever scarcer dollars as dollar "credits" evaporate the same way they came into existence: into thin air.