• The sell-side imbalance at the close is disappointing.

"One last thing." -- Lt. Columbo

At the end of the session, markets are showing an imbalance to the sell side.

Speaking of Janet "Ruth Buzzi" Yellen -- unless my clock is right, it's sock-it-to-me time on the close! 

Against a continued news-impacted backdrop, this is disappointing.

As I wrote in the previous post, aggressive and opportunistic trading is not for everyone -- but it is for me!

• Enjoy the evening.

Thanks for reading my diary today. I hope it was helpful.

I am still doing research on my idea now, so I have to run.

Enjoy the evening.

• I am sticking with the notion that the U.S. stock market hit a high in August 2013.

I want it to be abundantly clear that while I believe that we could see a near-term rally in the markets (coincident with a last-minute budget compromise), I am sticking with the notion that the U.S. stock market hit a high in August 2013.

Remember, after the expected rally, investors (and traders) face the uncertainty of corporate profits and sales, a profit margin for leading U.S. companies that is more than 70% above the five-decade average and still-elevated P/E multiples (particularly vis-à-vis the beginning of the year). We face a structural disequilibrium in the labor market, our middle class has gotten screwed by policy, geopolitical risks (forgotten over the last two weeks) are mounting, and getting back to my August top column, several other significant market and economic headwinds are clearly visible.

For most, a few-percent rally is not really worth the effort, unless you are swift of trading hand.

These sort of short-term moves are not for everyone.

For the average investor, I continue to endorse the notion of above-average cash reserves and smaller-than-average positions.

• Here is his take.

Below is The Lindsey Group's Peter Boockvar take on the FOMC minutes:

After hearing from Bernanke in a press conference right after the release of the September 18th FOMC statement and then from a slew of Fed members after in speeches to explain what went on, there was not much else we were going to learn in the minutes. We know it was a close call not to taper as the Fed's data dependence criteria was obviously not met. I think most interesting was to glean how much the FOMC paid attention to markets as they clearly did the opposite of what most expected.

Those that didn't want to taper didn't seem to care much about the market. Those that did thought "investors had come to understand the data dependent nature of the Committee's thinking about asset purchases, and, because they judged that the conditions laid out in June had been met, they believed that the credibility of the Committee would best be served by announcing a downward adjustment in asset purchases at this meeting. With the markets apparently viewing a cut in purchases as the most likely outcome, it was noted that the postponement of such an announcement to later in the year or beyond could have significant implications for the effectiveness of Committee communications. In particular, concerns were expressed that a delay could potentially undermine the credibility or predictability of monetary policy by, for example, increasing uncertainty about the Committee's reaction function and about its commitment to the forward guidance for the fed funds rate, with the result of an increase in volatility in financial markets."

Bottom line, the market response to the non taper was rightly called by the dissenters as the September 18th stock market rally was given back in the following three days, direct to their point that we'll get an "increase in volatility in financial markets." Because of the fiscal nonsense, October taper is off the table and we'll just have to wait and see what the data says for December. Of course what the Fed proved in September is that data dependency is extremely subjective and a better economy is in the eye of a Fed member.

• Milo is miffed that I covered my small-cap short exposure.

My small-cap analyst, Milo Kass, is angry (and now bored) that I covered my Russell 2000 Index shorts yesterday!

• The meeting occurred before the government shutdown, so the words should be read with that as a perspective.

The September FOMC minutes are really irrelevant as the meeting occurred before the government shutdown.

So the words should be read with that as a perspective.

The main theme of the meeting was that most members expected tapering to start in late 2013 and to end by next Summer.

However, as I have written, with the economic data vacuum likely to be followed by the ambiguity of the reports, the chance of a tapering this year is now near zero.

As expressed on Monday, the earliest spot for tapering is January 2014. That said I continue to look to March 2014 as the start of the end of tapering.

The market remains hostage to Washington, D.C., news.

• Shares were up by $6.50.

Apple (AAPL) is getting jiggy.

Shares were up by $6.50 and are still up over $5.

• A heads up.

I continue to research my potential home-run stock, and I will be stepping into a meeting on it at 2:00 p.m. EDT.

I should be back for the close.

A heads up.

• There is hope.

As it is written in the "Investment Bible," as banks stocks go so does the market.

For the first time in a while banks are outperforming today.

There is hope.

I am now at 30% net long.

• Her speeches are tightly orchestrated.

A lot has been written about pending new Fed Chairwoman Janet Yellen today.

One thing that hasn't been mentioned is that Janet Yellen is always scripted and her speeches are tightly orchestrated.

Perhaps it can be observed -- and I am certain no one has brought this up yet -- that Janet Yellen's scripted speaking style closely resembles the style of "Laugh In's" Ruth Buzzi!

In fact, this might all be a trick -- listen closely; they may be the same person!

• According to BTIG.

Break in: BTIG reports,

Speaker John Boehner and majority leader Eric Cantor are meeting this afternoon with House minority leader Nancy Pelosi and House minority whip Steny Hoyer.

"Reps. Pelosi and Hoyer asked for the meeting, and as we've stated publicly, we're willing to meet with any Democratic leader who is willing to talk," says Michael Steel, Boehner's spokesman, via e-mail.

• A period of base-building is likely.

I have received numerous questions about whether Monitise (MONI.L) is an add after the recent bout of profit-taking.

While by all counts the company is executing well, as expressed since mid-September, I would not be in a rush to increase my holdings in the stock as a period of base-building (after the spectacular run) is likely.

If your investment time frame is at least six to 12 months, however, I would be comfortable adding here.

• The stock crosses over into positive territory.

Apple (AAPL) goes green.

• Here is his great summary.

Below is a great summary of the upcoming Yellen Fed from Rich Farr:

JANET YELLEN WAS THE RIGHT CHOICE, EVEN THOUGH WE DISAGREE ON POLICIES:

According to multiple reports, Janet Yellen will be nominated by President Barack Obama to head the Federal Reserve.  As far as experience goes, Janet Yellen is by far the most qualified person to lead the Fed.  She is an incredibly thoughtful policymaker, and she has shown an ability to be hawkish or dovish when necessary; however, investors should take note that she is currently one of the most dovish members of the Fed.  Mrs. Yellen has a history of visionary predictions.  In June 2007 she stated, "I feel the presence of a 600-pound gorilla in the room, and that is the housing sector. The risk for further significant deterioration, with house prices falling and mortgage delinquencies rising, causes me appreciable angst."  Mrs. Yellen also pushed for pre-empted rate hikes in 1996 during the Greenspan Fed to head off inflation and the risks of an emerging credit bubble.  If we were faced with the same decision, we would have chosen Janet Yellen as well.  But our concerns are greater than any individual, we take issue with mere existence of the Federal Reserve!

Key things to know about Janet Yellen's policies:

On Inflation ¿ Janet Yellen agrees with Chairman Bernanke that the Fed should target an explicit inflation rate.   We whole-heartedly disagree with this view.  We do not believe that prices should rise over time.  In fact, we believe that innovation and productivity should cause slight declines in prices each year.  As prices fall, the standard of living rises.  It makes perfect sense that as your dollar savings buy you more, you are better off in the long run.  Inflation targeting is short-term focused.  By targeting inflation, policymakers can exert more control over an economy in the near term.  As they create inflation, they force society to favor credit over savings.  Therefore, policymakers can 'create' GDP in a faster manner via inflation targeting.  In a sense, inflation targeting makes the policymakers look better.

On Nominal GDP Targeting ¿ Janet Yellen seems to lean toward the camp that believes that the Fed should target nominal GDP growth.  We find such talk of targeting to be inappropriate because the Fed doesn't have a mandate to target this metric.  However, there are many name-brand economists that subscribe to this notion.  The thinking can be boiled down to a very simplistic viewpoint: 'when all else fails to create growth, create inflationary growth.'  We believe such policies distort market prices, create significant disparities between the 'haves and have-nots' in society, and create a misallocation of capital toward areas of the economy where prices are rising at a faster rate (energy comes to mind).

On Employment ¿ Janet Yellen believes that the Fed's primary goal should be to achieve "maximum employment."  Such a goal is noble (indeed it is also within the Fed's mandate), but we believe that maximum employment is mostly unattainable via monetary policy.  All we need to do is look at the trillions of dollars the Fed has thrown at the current crisis and we see that job growth still can't keep up with population growth.  We believe that employment is not a metric within the Fed's control, except in extreme circumstances, like a credit crunch or inflationary environments.  But usually those environments are caused by Fed missteps in the first place (let's not forget how the Fed fueled the housing boom).

On Bank Regulation:  If there is one area where the Fed should be on its toes, it's in regulating the banks.  Mrs. Yellen believes that the Fed needs to strictly monitor capital requirements and risk-taking at banks.  But yet again we are faced with the challenges of human nature.  As Fed governors are politically-appointed, there isn't much personal incentive for governors to attack highly-profitable banks before a crisis emerges (in fact, we challenge you to name an instance where a regulator has prevented a financial crisis from occurring).  We agree with Mrs. Yellen that the Fed needs to provide strong oversight of banks and shadow banks.  But we know that when the time comes, the Fed will fail to stop the next crisis.   All we need to do is look at 2008 and the events thereafter as evidence.  Since 2008, the banks have managed to only get bigger and there is less competition in the banking sector as a result.  The banks continue to make risky proprietary investments, and if it weren't for a lack of investor appetite, they'd still be selling complicated instruments.

Bottom Line:  If we have to have a Federal Reserve, then Janet Yellen is the right choice to lead it.  But the best monetary policy mechanism wouldn't be run by any politically-appointed human being.  We'd much prefer a simple formula for money growth, and leave the rest up to the free market.

• It's gotta be Apple.

Favorite short-term trading long rental: Apple (AAPL).

• I would summarize the market by saying the politicians and the high-frequency traders control our short-term destiny.

• So far.

In addition to establishing a starter position in Imperva (IMPV) and increasing my SPDR S&P 500 ETF Trust (SPY) long at $165.44, I have added to JPMorgan Chase (JPM) at $51 and Apple (AAPL) under $483 this morning.

• I bought more shares at $165.44.

I have added to my SPDR S&P 500 ETF Trust (SPY) long today at $165.44.

• I am taking a small long rental in the name today.

Imperva (IMPV) is a disruptive factor in the business security solutions space.

The shares have recently dropped by $12 in a virtual straight line.

This morning, Deutsche Bank expressed confidence in the company's pipeline and channel checks.

I don't know the company as well as others, but I am taking a small long rental in the name today.

• Let's take a look at the overnight and early-morning price action in the major asset classes.

This is dedicated to our dysfunctional leaders in Washington, D.C. :

We met at a party last week

And the moment your eyes looked into mine 

Right then I just forgot how to speak

And the soda started tastin' like wine

How I wished everyone would go home

So I could say when I got you alone

Come on now

Let's lock the door and throw away the key now

(Shom dooby-dum dooby-dum-dum)

I can't wait to kiss you (oh no)

One little minute more

-- Jay and the Americans, "Let's Lock the Door (And Throw Away the Key)"

Let's take a look at the overnight and early-morning price action in the major asset classes.

The rundown:

• S&P futures is up 3 ("the Yellen effect?");
• Nasdaq futures is up 5;
• Nikkei is up 1.0%;
• China Shanghai is up 0.6%;
• European markets are mixed;
• euro is down;
• crude is flat;
• gold is down $13; and
• the 10-year U.S. note yields 2.63% (down 1 basis point day over day).

Worth mentioning:

• It was another newsy and disappointing day for Mr. Market yesterday with futures down another 18 handles, making this week's loss of 35 figures. The indices closed at their day's low just as Monday did.
• I was very active (and hopefully opportunistic) yesterday, as I added to my SPDR S&P 500 ETF Trust (SPY), Citigroup (C), Apple (AAPL) and JPMorgan Chase (JPM) longs -- the latter two were added to my Best Ideas list -- and I eliminated all my small-cap short exposure, including my iShares Russelll 2000 Index Fund (IWM) short and my Direxion Daily Small Cap Bear 3x Shares (TZA) and ProShares UltraShort Russell2000 (TWM). I also closed out my PowerShares QQQ (QQQ) short.
• I haven't done anything thus far in premarket trading.
• I am now about 25% net long. The complacency I described in Monday's opening missive is less so after Monday/Tuesday's schmeissing, as the S&P futures have folded by about 35 handles since I wrote it.
• Given my exposure, I have a lot of room to be opportunistic if this continues. My baseline expectation (two-thirds likelihood) is that an Oct. 16-Oct. 17 compromise will be reached. If I am correct, stocks will stage a swift rally toward the 1700 level. But as I mentioned in early August, I still believe that the market's top is in for the year. My fundamental concerns revolve around the top- and bottom-line corporate sales and profits for third-quarter 2013 and beyond, so I have no plans to go "over my skiis" long. I plan to  remain a flexible, active and opportunistic trader over the balance of the year.
• As I mentioned last week, I remain bearish of the bond market.
• Here is what I wrote last night in my diary regarding the Yellen's appointment --
  
  The Yellen nomination as Fed head has been largely discounted and was the base case consensus expectation.
  
  All else equal, Yellen should bring knee jerk of a weaker U.S. dollar, weaker bonds, better stocks. It could also bring a bid to yen.
  
  In response, Goldman Sachs just put out a piece on why they expect a late Fed exit, which is equity-market-friendly:
  
  We continue to expect a late Fed exit with the first federal funds rate hike in early 2016. One reason for this view, which we recently discussed in some detail, is "optimal control" considerations.
  
  In a series of speeches in 2012 Fed Vice Chair Yellen presented simulations that pointed to an even longer period of zero short-term interest rates than the FOMC's current threshold guidance imply. Our update of her optimal control path points to the first funds rate hike in 2016Q1.
  
  The key characteristic of the optimal control approach is that unemployment and inflation are allowed to overshoot their goals. In these simulations, the unemployment rate has fallen below its structural rate and inflation has somewhat overshot its goal at the time of the first funds rate hike.
  
  Yellen's appointment, above any other candidate for the position, should be viewed as providing continuity to current policy.
  
  Yellen has been a principal designer of the current Bernanke monetary policy and without question is against any tightening, even if the unemployment rate drops somewhat. This is consistent with Bernanke's latest speech, which indicated that other labor market measures might need to be utilized in setting policy.
  
  So far, the market reaction has been modest. There is likely to be a modest reduction in uncertainty and volatility. The yield curve should steepen a bit as there may be more reliance on dovish forward guidance vs. purchases of longer-term securities. but the curve is already quite steep, so this effect may be small.
  
  The 10-year note's yield is down by about one basis point and S&P futures are +6.
  
  And here is what The Wall Street Journal has to say about the Yellen nomination.
• And the dysfunctional beat goes on in Washington, D.C. -- has Paul Ryan provided a template for compromise?
• The World According to (Peter) Boockvar --
  
  While it was fully expected that one very dovish central planner at the Fed would replace another, Asian emerging markets are breathing a sigh of relief that the QE will likely keep on coming and paying more attention to that then the continued wrangling between Congress and the White House. The gains were led by China where the Shanghai index rallied for a 4th straight trading day (holiday between the 1st two and 2nd two) also on hopes for more free trade zones in addition to the one in Shanghai. Markets in Japan, India, Singapore, Thailand and Indonesia were higher too. Also, maybe Asian buyers know that whatever is going on in DC on fiscal issues is temporary and the direction of US monetary policy and the global economy is the most relevant.
  
  The one-month bill yield is moderating 3 bps after yesterday's spike but all the drama and focus related to it is very overrated. This paper is going to get fully repaid but the timing of it is now in question and money market funds don't want to deal with the opportunity cost and the potential of breaking the buck on any short term mark to market of US bills to zero on a technical default which will of course be quickly reversed. The longer end of the curve is still unaffected as the 2's-10's spread today is falling to the lowest since July. This all said, the longer term repercussions on the appetite of US Treasury debt from our foreign friends bears a close watch not only due to the fiscal debt explosion but also in part to the major uncertainty the Fed created on September 18th with respect to monetary policy. January thru July, foreigners have sold a net $11.9b of US notes and bonds. If the year end figure is also negative, it would be the 1st time since 2000 that foreigners were net sellers.
  
  With another fall in mortgage rates to 4.42% vs 4.49% last week, the MBA said refi's apps rose by 2.5% w/o/w, up for a 4th week to a 2 month high. Purchase apps though fell .7% after dropping 5.6% last week. Purchases are still 15% below the multi yr high seen in May as the unintended consequence of the Fed's attempt to AGAIN juice home prices with double digit gains vs income growth of 1.5-2% has now softened the desire for 1st time home buyers to step in at the same time mortgage rates are still 80 bps higher than they were in May.
• Will today's release of the FOMC minutes impact the markets? Bank of America feels so --
  
  The September FOMC meeting was among the most anticipated in recent memory, and the minutes will be pored over for signs of when and why the Fed might taper. Like all the minutes this year, we see a significant chance that they give an outsized platform to nonvoting participants who have been more eager to taper QE than the voters. As such, there remains a real chance that markets could misread the likely conditions for the Fed to begin to taper. For example, concerns about asset bubbles, potential inflation, and financial market expectations have been confined to a vocal minority, yet may get amplified in these minutes. We suspect the minutes to show that, for most voting members, disappointing recent data and rising risks were sufficient to keep policy unchanged in September. That said, the decision on asset purchases was likely a close call. Fed officials are likely to keep the door open for the next several meetings, but the spillover from the government shutdown keeps Fed tapering on the sidelines until early 2014, in our view.
  
  There are a number of important topics that are likely to be discussed at this meeting. Broadly speaking, we will look for discussion of what economic conditions would make members comfortable tapering. To start, the updated assessment of the growth outlook and perceived risks around a shutdown, now that it has happened. Also the outlook for the labor market, particularly the extent that members see cyclical vs. structural factors playing a role going forward. Notably, some Fed officials revised their expectation for the long-run unemployment rate lower in September, which suggests a still-prominent role for cyclical factors. A few participants in July noted concerns about persistently low inflation; a few more sharing that view would suggest a longer time until tapering begins.
  
  On the policy and communication front, we expect an active debate over the risks around "tightening of financial conditions" and the feedback between markets and Fed policy. We anticipate a small number of participants will be critical of how Fed communications have been handled, given recent speeches. More important will be any discussion about how the Fed might attempt to strengthen or clarify their forward guidance, and what motivated the lower-than-expected "dot plot" of funds rate projections in 2015 and 2016. We suspect the core of the Fed is starting to move toward embracing an "optimal control" framework for policy; we will keep an eye out for debate about this approach and alternatives.

In the news:

• National Journal -- "Republicans Are Awfully Close to Violating the Constitution."
• The Washington Post -- "Why John Boehner Might Have No Choice but 'Unconditional Surrender'."
• Financial Times -- "The Pain of Rebalancing Global Growth."
• The Wall Street Journal -- "Obamacaid."

Some possible economic and earnings catalysts that could impact the markets:

• FOMC minutes from Sept. 17-Sept. 18 meeting (2:00 p.m. EDT).
• Fed's Evans speaks.
• ECB's Draghi speaks in Massachusetts.
• IDC and Gartner will report preliminary third-quarter PC shipments today.
• Analyst meetings -- AGU, ASNA, HPQ, MDCO, NKE, RENT.
• Earnings before the open -- COST, FDO, RPM, Vedanta (production).
• CVX interim third-quarter earnings updates.

• And the hits keep coming.

The hits (alliances, product adds) keep coming at Monitise (MONI.L)!  

• The FHA plans to shortly dispose of nearly 30,000 nonperforming loans (worth a total of $5 billion).

I uncovered another potential positive for Altisource Residential (RESI) this morning in a National Mortgage News article.

Apparently, the Federal Housing Administration plans to shortly dispose of nearly 30,000 nonperforming loans (worth a total of $5 billion).

I have previously chronicled Altisource Residential's aggresssive acquisition history over the last six months and its interesting business model by which the company outsources modifications/servicing of loans to Ocwen (OCN) and remediation/renovation/lease of foreclosed properities to Altisource Portfolio Solutions (ASPS)/Altisource Asset Management (AAMC).

While I haven't yet spoken to Altisource Residential's management, I think we should presume they will be a bidder for this book of business.

If partially/wholly successful, this would be an important win for the company, and profit estimates (and dividend paying capability) would be measurably increased.

• Fastenal whiffs on earnings.

My best indicator of domestic manufacturing, Fastenal (FAST) reports in-line sales and a $0.01 miss to the bottom line.

Shares are down 5% in premarket trading.

• My summer Twitter vacation is officially over.

I have been off Twitter for almost four months.

It should be obvious after a couple of tweets I posted yesterday that I have decided to return to Twitter on a limited basis.

While I don't plan to post as frequently as I have in the past, I recognize (when conducted in a civil manner) that Twitter can be legitimate and value-added platform for instantaneously communicating to others.

Frankly, if it is good enough for Warren Buffett, Carl Icahn and a number of other investment professionals that I respect -- it is good enough for me.

So, I am back, and I am giving Twitter another whirl.

In doing so, I plan to ignore (and block) the haters because haters are gonna hate.