Scott Burrill - Market Notes

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Levels for Wednesday

Dec 13, 2017

Good Morning: Broadly, the Dow Industrials and SP500 lead while the Nasdaq 100 and Russell 2000 lagged. Leading the charge in our proprietary Informed Liquidity measure was the heavily weighted Financial Sector, Dow 30, and Volatility.

We note the pick-up in Volatility, and in particular our preferred Volatility of Volatility (VVIX) measure closed at 93.27 or up 1.31%. Significant levels are 100 and 110. This matters given the potential catalysts tomorrow. 

We have on tap Economic Releases in Mortgage Applications, CPI, Energy Reports and then the FOMC Rate Decision, followed by outgoing Chair Yellen's Press Conference. The option implied move is + / - 12 points or 9% implied volatility through the close. Recall for the week, the expected move through Friday was + / - 25 points.

react-text: 11458 Regarding the FOMC Release, the probability of a rate hike is 100%. However, over the last few days the likelihood of a 1/2 point rate hike has increased to 12.7%.

As we head into tomorrow, the Bias is Up except for the Russell 2000.

Logic dictates consolidation in the SP500, but implied moves suggest otherwise. As we have tracked numerous times, following an FOMC Announcement, the typical move is an up/down/up or down/up/down pattern. 

If what we logically expect to happen (consolidation) doesn't, the opposite reaction is often more violent. 

Therefore, if the Fed increases by .50% that will likely surprise the market leading to a powerful move, as would no rate hike. Otherwise, 12 points is well within the average daily range over the past 10 days.

Bias is Up > 2670.

Once again we turn to Bitcoin as crypto dominates the headlines. Futures volumes have been low. The differential between the Futures and Cash has narrowed which is good, but trading the outright Bitcoin currency is optimal for now.

The closing Implied Liquidity Ratio was a balanced 50% with a degrading slope going into the close. The Trend remains Up though with more intraday two-sided movement.

All the best,

Scott

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