Monti's biggest fear: 

Via @BloombergTV

Bloomberg economist Joe Brusuelas writes that the fiscal cliff poses a "significant risk" to U.S. outlook.

Brusuelas writes, "The current Bloomberg consensus forecast is for a growth rate of 2 percent in 2013, with 1.9 and 2.3 percent rates of expansion in the first two quarters of next year. Should Congress delay acting until early 2013 to address [fiscal cliff] issues, growth will likely slow to less than 1 percent during the first half of the year. Persistence of financial gridlock would probably push the economy into recession in the first half of 2013."

The macro trend from the May lows of just under 78 a BBL failed at 97.50 Monday resulting in a stop run into 95 followed by a failure of 94 today resulting in a 91.55 low Wednesday. Seems a bit to easy to tip a billion dollar market on its side just because you can...??

4 hour CL_F

channel'ing - a break below 1449.75 or break over 1458 will dictate the next leg of trend..

15 min ES_F

weekly SPX

 Below is an excerpt from a JPM weekly report which came out after the close. have a good weekend.

"How I Learned to Stop Worrying and Love the Rally – stocks sprinted higher this week, extending the very impressive rally and leaving most major global indices sitting at multi-year highs.  The big catalyst behind the move was the Fed but Bernanke really as just one piece of a continuum of events that have contributed to the very strong price action.  Keep in mind the S&P had ripped 100 pts even before the Fed on Thurs, largely b/c of the impressive policy measures adopted in Europe (Bernanke arguably is just throwing fuel on an already large fire).  

Stepping back, the big tectonic drivers of this rally remain in place – falling tail risks (including and especially the ones in Europe), massive CB liquidity, improving US housing, and expanding multiples.  That is it.  All the other “negatives” aren’t irrelevant but they can’t compete (for now) with those other positive forces (this is why the warnings from FDX/INTC, the Libya events, surging crude, poor non-housing eco #s, sluggish China, etc, are being ignored).  

Sentiment is still a little weird – increasingly there is an expectation that stock prices will continue rallying but only b/c of central bank manipulation (so the average investor isn’t wildly bullish on fundamentals necessarily but acknowledges the power of central bank liquidity).   - Alessandro P. Garbuio JP Morgan Prime 

Gundlach is very intelligent and calmly spoken. his points on buying bonds just for capital appreciation leaves one open to missing out on other opportunities such as buying Facebook and selling it every time it goes up 4 percent. Of course this is just one example of what one could do, but it should tell you how these guys are indeed doing business in the stocks many of us love to hate. And its not "dumb  money" either.        Thinking outside the box is what puts profits in your pockets.

"natural gas is up 50% from when we last talked" - Gundlach

"I only buy facebook to trade it, just to prove a point that it is more rewarding than playing around in treasury bonds. Thats it." Gundlach 

30 min SPX

Welp.. we got more twisting and shouting from the Fed to the tune of $40 billion a month .. the markets liked it.. 1450 printed in SPX an ES_F .. the RUT broke to her new 2012 highs as we expected here at hedge.ly.

 The 30 year bond fell off into 146'05 while gold soared past 1760.... patience.. Bernanke will explain himself at a presser in 45 min @ 2 pm ET.

15 min ES_F

Check out the Trade For Profit Forum so you never have to trade alone again.

This post builds on a post from pre-Jackson Hole....

Asinine HFT induced and exacerbated chop almost blew the vacuum tubes out... but they didn't and the ES made a new high AFTER regular session closed (as usual) of 1440.25.

1432.75 was the last tail lower before the ES as well as Apple ripped to highs. Apple moved 12 points in the last hour. Currently is trading for 672 AH from 656 at 3:00 pm ET.

15 min ES_F

30 min ES_F

weekly RUT

US equity indexes meandered higher while the VIX climbed  ahead of the German vote on whether or not the country will contribute to the ECB bailout fund as well as the beginning the two day FOMC meeting tomorrow. (my take on the VIX action is managers are locking in profits from the recent run up as well as shoring up hedges as we sit on 5 years highs)

That being said you have to ask yourself what is your plan ahead of tomorrow and Thursday's FOMC results.... your plan must include ideas for a sell off and or a rally depending upon the news flow.

The recent Russell run up could very well be profits from the bond run up being put to work in speculative *more risky smaller cap companies in hopes the index as well as its components will catch up to the 5 years highs reached by the SPX and NDX last week. If this is the case and the index does make a new high for the year you should be cautious because speculative capital is fast capital.

When looking at the Russell 2000 chart above, the blue dotted line is clear resistance at the 2012 high of 847.92 with support at 835.55 then 823.30 (redline). The red line is also level which the index gapped over Thursday morning following the Jackson Hole conference speech by Ben Bernanke.

1 hour RUT

30 min SPX- showing inverse H&S formed fri-wed of last week

The 1420-38.75 level in the ES as well as the SPX will more likely be the range until the early hours of tomorrow. Above 25 if we break over highs, clearly 1440 is the first line of defense for sellers, above is air into 1450.

Below 1420 means the price could enter the red box highlighted below and in theory could fall easily to the breakout level of 1290-1400 if the Fed and or German courts disappoints wed and or thursday.

Quite a few participants are long only and are very long though in my opinion many participants are short and or have not participated in the last 100 points of the S&P because of complacency and or skepticism. A fire burns hot, but when the fire is fanned it becomes white hot. A squeeze related to fed action could fan the fire.

30 min ES_F - Red box is the area which prices could come volatile if 1420 fails

Our surmations from a little over a month ago were on the mark... Not many participants pay attention to the smaller caps names and or the Wilshire BUT considering the strength in both the Wilshire 5000 and the Russell 2000 the last week you cannot argue this rally had little participation. Monday will be a test to see where a new foundation could be build over resistance of 14,950 in W5000 and 835-40 in the RUT

Weekly W5000FLT

Monthly W5000

The video speaks for itself

Who saw that coming?? we did. The breaks to the upside of 2800 and subsequent trade into 2829.50 in the futures secured a possible new range for the index.

Weekly NDX

Daily NQ inverse H&S

Today we are nearing our 15,000 target from a posted on 8/6 titled "Wilshire 5000 x 3 = 15,000"

.. what happens next.... well we must wait until the 15000 line is crossed.. Currently the W5000 is up 284 points or 1.94 percent at 13966.

30 min W5000

15 min W5000

Daily W5000

The previous post by us titled - The XHB Homebuilders ETF Did Something Today - highlighted the break over 22.. now we are up into a break out over 24.22.

Daily XHB

30 min XHB

6 months of consolidation under the 2800 level has build a moderately strong foundation down into the 2450 - 2500 area. What is next? perhaps a move like we saw from 12/19/2011 - 3/26/2012.

Daily NQ_F

Weekly 6E_F

1 hour 10 year future

A game of catch up to the large cap indexes which have already made new 2012 high.. The RUT is 25 points or so under the 847.92 2012 high..

 ..That being said...in reference to relative strength in the RUT today..... (IWM = ETF, RUT = Cash, TF = Future)

Did profits from the last two week straight up run in bond prices go to work in the RUT today?  Perhaps....

the general theory is speculative profits usually are used speculate first in smaller cap speculative companies... OR a massive short position was covered in the RUT today.. either case tomorrow will be interesting in regards to where the RUT will open up and or end up ... 820 now support 825 resistance.

Daily RUT

Weekly RUT