What is Going On?

The FED minutes presented some difficult numbers for the market to digest Wednesday.

First, the 95 Billion monthly reduction of the Balance Sheet is in the zone of serious action,

So, maybe it is the fact that the number is a CAP, not the actual number that kept fear at bay.

Or maybe the market expects the FED to blink at the first sign of a significant downturn in the market, economy, or inflation.

My guess is that the fact that the stock market did not have a big reaction (down 10 to 15 %) Wednesday is due to three primary factors,

1) a huge percentage of the retail trader crowd have never been in a bear stock market and don’t know what to be afraid of,

2) the short side of the market is dominated by big money managed by old, seasoned traders who may be a little too confident and short at the moment,

3) the FED Funny money is still waiting in the wings, ready for something crazy to entice it to play one more rally before it is taken away.

4) Or maybe the market is waiting to see if Jerome puts some sugar on the message after next week’s FED meeting.

As such, let the games begin in this early stage “Stop the Inflation” move by the markets. Watch sentiment and your charts and monitor the inflation and economic activity numbers. The trading ranges we outlined a couple of days ago for SPX and NDX are still valid for a few days.