The Tsunami that is Yellen

Steve Kanaval |

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Written 9/17/15 before the number

The calm before the storm prompts me to consider many things – not the least of which The Donald with nuclear codes, and Janet Yellen with her finger on the interest rate trigger, subtly forced to guide higher as her days of QE have run dry. Now her job gets much more difficult, causing the water to roll out before a potential ugly tide can roll in. Today, I would not want to be Janet Yellen.

Anticipating how markets react to Federal Reserve action is a fools game, but during these times, I’m glad my chosen way to analyze markets leans on technical analysis and the perspective that historical price action gives you as an analyst. For me, these lessons were honed by following commodity markets like corn and soybeans carrying through today’s move by the Fed.

Forty years of not caring what the name of the asset was at the top of the page and only looking for clues in historical pricing has sharpened my senses to familiar patterns that indicate tops and bottoms, and this action looks like other market tops seen in 1987 and 1999.

I think what I’ve learned is that cycles rule markets, and the interim noise distracts every one. I got a phone call Sunday night from a very good portfolio manager who got sucked into selling weakness, and had to pay the price of a weekend of worry, followed by four days of pain while waiting for the Tsunami that is Yellen.

The 10,000 Pound Hat

I do not miss the pain that comes with managing a client’s portfolio, it is a 10,000 pound hat that weighs heavy on your shoulders. I’m glad I don’t manage OPM (Other People’s Money) on this mid –September day. I’m much happier writing about it.

Having said that, in little more than an hour, we will get a raft of volatility and a repricing of US Equities, and watching how this unfolds is the reason I have chased the action on far flung trading floors from the CME to the Pacific Coast. It is about the love of the game, and days like today are when great traders are born, and fortunes are won and lost.

I know in my head what the outcome will be – I can see it clear as day, and the historical price action of yesterday gives me confidence that I can see ahead and act with conviction. Lucky for me, I only have to write – the days of the weight of the 10,000 pound hat are gone, allowing me to find other markets to discover.

But one last time, I need to place a wager and scramble to request a short borrow while the tide runs far. It can mean only one thing – when the water returns, it will bring with it unwanted power, force and volatility. When it stops Friday afternoon and they close down the machines for the weekend, we will stand and look, knowing that they will open the window again Monday morning. I will not be alone eagerly awaiting that ringing bell.

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