Transparency

Welcome to the new world of Fed transparency ! Yet more talk and no action, but this time two opposing views from Fed Heads !! Such is the noise we are subjected to. Perhaps the most telling market action is that on the release of comments advocating more Fed QE later in the week, the market did not reach it's previous days highs. We feel this is a drawn out topping process, especially in light of yet more deteriorating economic numbers and a spike in the vix as predicted. We do have to be aware of a possible co-ordinated  central bank 'shock and awe' move, but until this weeks level of 1427 is broken we will continue to hold our short position.

VIx Fix

The market's rally continued this week, although with reducing volatility. In fact the volatility is reaching multi-year lows and we feel bottoming out, preparing for a move to the upside. After a 11% + rally over the summer months, the markets moves to the upside are becoming more limited especially without any natural 'healthy' correction. With this in mind we increased our down position, as stated, by an extra 3 contracts at 1413. Our target has to be re-adjusted to 1380 and a stop-loss of 1429 for this week.

Fundamentals

At the risk of sounding like a stuck record, the markets are completely ignoring economic news on the hope of more monetary stimulus. However, whether it be last week's UK industrial production or China's trade position the numbers are pointing to a severe slowdown that we feel has to be factored in when the only stimulus being offered thus far is that of rhetoric. We are continuing to hold our short position and this week will add 3 more short contracts should the market rally up to 1413. Our target for the week is 1370, where we will take profits.

All Talk

Expectations were running high this week, that the central bankers would produce the big bazooka's promised in various preceding speeches. In actuality it was just more empty promises, that the market was not convinced about until an abrupt turn of sentiment on Friday, leading to a very unexpected gain for the week. We suspect there may be an unreported story here concerning the Knight trading software fiasco and an effort to flood the market with short term liquidity to avert any panic.  However, events last week have effectively changed nothing and we continue to hold our short position and strategy from last week, excepting that we will not add to our short position above 1400 and our target price this week is 1342.