Thursday -- Powerful Markets Amid Twisted Convolution

ES Futures:
Backing and filling as expected after a furious up day, post-Fed.

News & Commentary:
The Fed dropped patient but acted patient. Then we got to witness the awesome power of the markets when trades are crowded. It was a warning. A small example of coming volatility.

Here's a word for yesterday's Fed statement (only because confused got used by somebody else): convoluted.

The Fed is so confused that in order to maintain the illusion of control, they deliberately convolute (literally: to twist) to confuse others.

(Interestingly, the word attorney comes from the French word aturner, which also means to twist.)

Recall this was perfected by Alan Greenspan (who's more than capable of speaking clearly today at age 89).

Yellen served with Greenspan during the Clinton years.

Anyone could have detected the many contradictions in both the statement and her testimony yesterday. Even a child.

The good news is that yesterday went a long way to clearing up the overall pattern of the S&P. And while the USD tumbled badly, it regained much of its slide overnight. Take note.

I also heard calls that "the commodity slide is over" yesterday and that "the dollar got crushed," and "the dollar is toast folks."

I beg to differ.

Money velocity remains nowhere. The longer it does, deflation is the problem.

And since most of the debt on the planet is dollar-denominated, the strength in the dollar represents the single greatest indication that the Fed has lost control.

FX:
Beware massive currency moves -- there are trillions moving way too fast. That's when things break.

The move in dollar futures took back all the gains since January in mere hours, and was the largest single move since 2009. Yet the USD index has already clawed most of it back.

Weakness has returned to GBP, AUD, and EUR. However, it does appear there could be further dollar consolidation, thus further gains in other majors, but these would likely turn out as bounces.

And that's good. From there would come the best set ups.      

The ominous thing, thus far overlooked, was that the yen got notably stronger yesterday. One day does not a trend make, but that reaction was telling. If the yen eventually does strengthen much more, as it began to do in 2007 before the S&P broke down, that would be a bad canary.
                                                                                    
Treasuries:
10s went a long way to showing that rates will not go up for quite a long time, but are no way out of danger. Watch 10s. Repeat. Watch 10s. . .

Energy:
Ditto energy. Crude looked great for a few short hours then flopped. I still like 37.33.

NG is still in a low odds range area and looks comfortable there for a little longer.

Metals:
Gold bugs got lathered up over strong moves in gold and silver yesterday, but here too gold would need to break above 1300 to void the larger pattern in play.

*Note: I use daily charts for much of this wider analysis, so my comments will look quite ridiculous at times when short term swings take place such as yesterday. My eye is on the bigger picture.

S&P Outlook:
The great thing was that the S&P got a little clearer yesterday. Now the question is one of upside intensity.

The preferred scenario:

The alternate. Valid, cautionary, but less likely.