QE 4

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QE 4 If you have been paying attention to the real reason why the Federal Reserve conducted QE2, Operation Twist, QE3, etc it is not to help the jobless, or to lift inflation, or for the general economy. No, it is now and has always been to boost the stock market. I know that this isn't part of the Fed's mandate, but why would that matter to a group of secret bankers? Just two days ago, when the market (ES) was trading at a shockingly low level of 1875.00, word came from on-high that a Fed member mentioned a possible QE4 action. Could it be true this quickly, even before QE3 had ended? Nobody waited to find out; the S&P500 exploded 20 handles very quickly. • FED'S WILLIAMS SAYS QE MAY BE NEEDED IF ECONOMY FALTERS More from Reuters: The head of the San Francisco Federal Reserve Bank on Tuesday said he would be open to another round of asset purchases if inflation trends were to fall significantly short of the U.S. central bank's target. Although he said it would take a big shift in the U.S. economic outlook for the Fed to restart its bond buying, John Williams said the possibility of a new downturn in Europe and other global economic woes pose a risk to the United States. "If we really get a sustained, disinflationary forecast ... then I think moving back to additional asset purchases in a situation like that should be something we should seriously consider," Williams said in an interview with Reuters. Wednesday's and Thursday's prices were far lower than when Williams made his statement and was, in fact, 10% off its all-time high. Surely the phones at the Fed were ringing off the hook; something had to be done! With Thursday's massive gap-open lower, another comment about QE4 had to made. The stock market must be rescued! BULLARD SAYS BOND PURCHASES SHOULD BE DATA DEPENDENT but BULLARD SAYS FED SHOULD CONSIDER DELAY IN ENDING QE. So much for data-dependence... Again the S&P500 exploded on these words of more free money for the bankster class, politicians, and the already uber-wealthy. With this announcement, the ES skyrocketed 25 points in just 3 minutes! Can we please dispense with the Fed-mandated drivel of jobs and price stability? As we see, it only cares about the stock market. Read Past Issues of Larry's Newsletters at TradeWithLarry.com

Markets are looking for another handout from the Fed, so whatever Fed Chair Janet Yellen says or does not say Friday will be a big deal. Stocks bounced back Thursday after a rough opening, with the S&P 500 (^GSPC) ending the day less than a point higher, and the Nasdaq (^IXIC) up 2 points. The Dow (Dow Jones Global Indexes: .DJI) was off 24 points, but the small cap Russell 2000 was up nearly 1.3 percent. Earnings will also be a focus Friday with General Electric reporting before the bell. Morgan Stanley, Bank of NY Mellon, Synchrony Financial, Comerica, M&T Bank, SunTrust, Huntington Bancshares, Kansas City Southern and Textron are also reporting. Read More

TECHNICAL DATA ES 1860.25/1839.25 POC 1851.00 YM 16060/15940 NQ 3764.25/3726.25

​​Don't rely on an outlier, but be prepared for one. And by prepared, I mean prepare to profit from one. Let's take a look at our earnings play on Netflix (NFLX). We signaled a short strangle swap. The 10/24 vs. Nov 410/470 strangle swap for a $10.00 credit. Using our methodology, we modeled the signal to have a maximum risk of ~0.30. This is if we got no move at all and implied vol didn't regress to normal levels. Over the past two years, the average move has been 15% with some moves as big as 42% (1/24/13). The market was pricing in about a 12% move. Using the same methodology, If we just got the move the market was pricing in, we would have made $1.58 to the downside and $2.25 to the upside. If we trust our methodology (and we had better), that's a great reward to risk of 9:1! We get this by taking the average profit on the priced in move and dividing it by our theoretical max loss. Of course we do this signal. But what happens if we get a move like today? There's a widespread reset of expectations on Netflix ​after the company deliver​ed​ subscriber growth below guidance in Q3 and gets a reality check with HBO stepping into the streaming fray.​ It was down over 26% when it was on it's lows. Call this what you will, black swan, outlier, whatever. It's something that you at least have to consider. It's moved 42% before so is 26% that crazy even if the market was pricing in 12%? You cannot ​leave yourself with undue risk on a 2SD or 3SD move. Instead we cashed in on it. Sold the signal for $10.00 bought it back for $1.75. Read More

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