"Just one more thing."

- Lt Columbo

How about that (paper) pairs trade long Wells Fargo (WFC) /short NVIDIA (NVDA) ? 

New high WFC and NVDA -$9!

Monsoon:That was an illegal move!

Heenan:No it wasn't.

Monsoon:Yes it was!

Heenan:No, it was a legal move, it was a Greco-Roman Hair Pull.

I am going to leave early for the Jewish holiday but I wanted to wish all my Jewish friends and relatives a very Happy New Year.

I will leave you all with some more wisdom (above) from Bobby "The Brain" Heenan who often made more sense than Fed Chair Janet Yellen.

Thanks for reading my diary and enjoy your evening.

See you bright and early tomorrow morning.

Here is Goldman Sachs's view of the FOMC statement:

BOTTOM LINE: The FOMC left the funds rate target range unchanged and announced that balance sheet runoff will begin in October, as widely expected. The median dots in the Summary of Economic Projections continued to show a third rate hike this year and 3 hikes in 2018; however, the median dot declined for 2019 and is now consistent with just over 2 hikes in that year. The post-meeting statement continued to describe risks to the outlook as "roughly balanced" and added that headline and core inflation "declined this year" and are running below 2 percent. The statement also discussed negative near-term growth effects from the hurricanes, but the committee does not expect them to "materially alter the course" of medium term growth, and the SEP projection for current-year growth was actually revised up. Taken together, we continue to expect a return to rate hikes in December.

MAIN POINTS:

1. The FOMC left the funds rate target range unchanged at 1-1.25%, as widely expected. The median dot in the Summary of Economic Projections continued to show a third rate hike this year, and 3 hikes in 2018; however, the median dot in 2019 declined and is now consistent with just over 2 hikes in that year. The post-meeting statement made minimal changes to its descriptions of growth and the labor market, noting that the unemployment rate "stayed low." However, it acknowledged continued weakness in headline and core inflation, which "declined this year and are running below 2%." The statement also discussed negative near-term growth effects from the hurricanes, but the committee does not expect them to "materially alter the course" of medium term growth. The statement continued to describe risks to the outlook as "roughly balanced." There were no dissents to the policy action.

2. The statement formally announced that the process of balance sheet normalization will begin in October, as widely expected. Normalization will occur based on the "gradually rising caps" described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans.

3. The changes to the Summary of Economic Projections were on balance slightly hawkish, at least for the near-term. The median funds rate projections was unchanged for 2017, with only four participants projecting no further hikes. The dots continued to show 3 hikes in 2018, but declined for 2019, consistent with only two hikes in that year. The median projected longer-run funds dot declined to 2.75%. Median GDP growth projections increased by two tenths to 2.4% for 2017 but remained unchanged at 2.1% for 2018. The median projection of core PCE inflation was lowered by two tenths to 1.5% this year and by one tenth to 1.9% next year, but was unchanged at 2.0% in 2019 and beyond. The SEP also lowered the unemployment rate projection by one tenth in both 2018 and 2019 to 4.1%, but kept the longer-run projection at 4.6%. The SEP also included 2020 projections for the first time, and these were largely in line with our expectations: 1.8% for GDP growth, 4.2% for unemployment, and a policy rate of 2.875%.

4. We continue to expect a return to rate hikes in December. We will revisit our subjective probabilities following the press conference.

Wells Fargo (WFC) trades over $54 -- to a new one-month high.

Meanwhile, the short side of the (paper) pairs trade, Nvidia (NVDA) , -1.50.

So far so good.

Peter Boockvar on the Fed (Hint: He thinks its like watching paint dry!):

Reading the FOMC statement was actually as exciting as watching paint dry. The comments on the economy and inflation were pretty much similar to the July meeting. There was reference to the Hurricanes and the devastating impact, but shouldn't impact growth over the medium term.

On what we cared most about today, QT will start in October. As to what they will do in December, 12 of 16 Fed members want to hike rates in December. Markets of course were about 50/50. As to dot plots and forecasts in 2018 and on, throw them out as the Fed will look much different next year in terms of membership. Therefore we'll get new opinions and forecasts.

There was no comment on easy financial conditions so we'll see if Yellen touches upon that in the press conference.

Bottom line, I reiterate my view that just as QE created much ebullience in markets, QT will do the opposite. While it won't be symmetrical because of the gradual start to QT, everyone has to remember that the 3rd mandate and purpose of QE was higher stock prices. Thus, I believe it's delusional to think there won't be a negative impact on asset prices as the reverse happens. As for the December rate hike, it is happening if the S&P 500 handles QT in a smooth way in coming months. Thus, we either rally ourselves into another rate hike or sell off away from one.

The 2yr note yield now sits at the highest level since November 2008, up 3.5 bps. The 2s/10s spread is down slightly as the 10 yr yield is up by 3 bps. The US dollar is rallying as to be expected with the Fed walking people up to the December hike.

The market has had a view that the Fed will continue to move away from a tightening.

However, today's Fed announcements suggest a slightly more hawkish attitude going forward based on:

* One rate hike in 2017 and three rate hikes in 2018 are expected by the Fed.

* Inflation expectations of +2% for 2018 and beyond stayed constant with previous projections.

The 10-year U.S. note yield is +3 basis points and has moved quickly thru the 2.25% level I mentioned earlier and stands at over 2.275%. The long bond is yielding 2.835%.

I don't think the yields above yet discount the Fed's intentions -- as the market's participants don't believe the Fed in their tightening and balance sheet tightening.

Let's see what the bond mavens, like Peter Boockvar say in the next hour!

I will report back.

In equities land, I don't see the Fed's comments as market friendly.

Terrific article (pre opening) from Jim "El Capitan" Cramer on Federal Express (FDX) .

With the benefit of hindsight and through hard-hitting analysis, his piece provided a great opportunity to trade the stock (profitably) and/or initiate an investment position.

I have added to the following longs today: Allergan (AGN) (at $211.25), Dillard's (DDS) (at $55.13).

Advice for preparing for the Fed:

The 10-year yield didn't stop at 2.20% (as I anticipated when I sold ProShares UltraShort 20+ Year Treasury ETF (TBT) ) and is now likely to shortly reach 2.25%.

That's up from 2.04% only two weeks ago.

Midday musings from Sir Arthur Cashin:

Another day in a very narrow range and yet another day with two more random down-spikes in the S&P.

Form chart says 15 minutes of frenetic trading after statement at 2:00. Traders will zero in on "dot plots", which are much more hawkish over next two years than futures project.

The most hated stock may be Wells Fargo (WFC) .

The most liked stock may be Nvidia (NVDA) .

Time to put on a "paper" trade -- pairing Long WFC and Shot NVDA -- based on extreme investor sentiment?

Just throwing it out there.

Let's keep score in the time ahead:

WFC: $53.45

NVDA: $186.20.

I have been pressing my Facebook FB short over the last two days.

I am back to a medium-size short in Apple (AAPL) for reasons I have articulated recently.

Now the technical seem to be moving into alignment.

If the absolute performance continues to deteriorate this will help my ProShares UltraShort QQQ (QID) and ProShares UltraPro Short QQQ (SQQQ) longs and my PowerShares QQQ (QQQ) short.

I would call your attention to Mark Hanson's post yesterday on housing starts.

Today, from my pal, The Lindsey Group's Peter Boockvar, on August home closings falling to a one-year low:

Existing home sales in August, measuring mostly contracts signed in the April thru July time frame, totaled 5.35mm annualized, 100k below expectations. It's down from 5.44mm in July and it's the slowest pace of closings in a year. Single family closings have now fallen in 4 of the past 5 months. Inventories remain modest as the number of homes for sale fell to a 5 month low and are down 6.5% y/o/y but with the decline in sales, months' supply held at 4.2. Home prices gains remained robust at 5.6% y/o/y.

Discouragingly, first time buyers totaled just 31% of overall purchases, a one year low and down from 33% in July. High prices led by "inadequate levels of available inventory" according to the NAR are creating two problems, the lack of choice and expensive prices. The NAR summed up this dilemma by saying "The ongoing rise in home prices is straining the budgets of some of these would be buyers, and what is available for sale is moving off the market quickly because supply remains minimal in the lower and mid price ranges." The NAR did mention Hurricane Harvey as impacting some closings but that storm occurred at the very end of the month.

As for the needed new construction, don't expect a surge in supply anytime soon in the areas of the market where they are most needed because of a dearth of labor and the high cost of them, along with rising raw material costs (particularly lumber). This in turn of course impacts margins more intensely on lower priced homes. Builders thus need higher prices to offset rising costs but buyers need lower prices and more supply to make it more enticing to buy instead of rent. This remains a problem for first time buyers and why the housing market has become really choppy according to the recent data.

This data point comes as the MBA reported today the 2nd lowest index print of mortgage applications to buy a home since February. On Friday I wrote this from the September UoM consumer confidence figure: "Those that plan to buy a home fell 2 pts to the weakest level since a one month drop in August 2011 and you have to go to 2009 before then. Those that said it's a good time to sell a house rose by 6 pts to match the highest level since August 2005." Yesterday we saw August single family housing starts rise by 13k m/o/m but after falling by 19k in July.

The builder etf ITB is at the low of the day in response.

EXISTING HOME SALES over the past 15 years

Yesterday I put a top-rope elbow dropin moving very large in Wells Fargo (WFC) long.

This morning I put on a top-rope elbow drop in moving to a very large SPDR S&P 500 (SPY) short (at $250.05).

General Mills (GIS) is down more than 5% as weak guidance underscores the likely continued weakness in consumer packaged goods shares, including Campbell Soup (CPB) , Procter & Gamble (PG) , Unilever (UN) , Mondelez (MDLZ) and Kraft Heinz (HNZ) , among others.

Here is my negative investment thesis on this space as expressed in "Buyer Beware of Consumer Staples Sellers Amid the Emerging Retail Monopsony"

This morning Apple's (AAPL) shares are down around $2.50 on generally weak iPhone 8 reviews.

Citigroup reiterates its buy on Allergan (AGN) ($280 price target).

Sell on Rosh Hashanah, buy on Yom Kippur?

I can't escape feeling that this market is completely manipulated and influenced by central bankers, machines and algorithms.

To be sure, the buy-the-dip mentality is firmly ingrained and is showing no signs of abating.

Nothing seems to matter as the market steadily climbs to record after record despite no progress on the Trump agenda that got this rally started, frightening world conflict potentials with North Korea and in the Middle East and South China Sea, expanding Russian Iranian moves that threaten stability, Isis still wreaking havoc despite territorial loss and divisive politics around the world.

Congress is dysfunctional and the Republicans, desperate for any win, are forsaking traditional principles for a deficit-busting tax bill just as destructive storms dramatically increase costs, limiting funds available for infrastructure.

Debt keeps bloating, with occasional aneurysms such as Toys R Us.

The proposed Fed policy to shrink its balance sheet is a joke. As one man said. "It is like trying to diet by eating two desserts instead of three."

I get the feeling that things could come apart in so many places, yet volatility is at a three-decade low.

These are crazy times -- and, to many, like myself, very frustrating.

While valuation levels provide a poor timing tool, high valuations (as seen now) have produced historically low returns.

This morning my friend Peter Boockvar, chief market analyst with The Lindsey Group, discusses sentiment, housing and the Federal Open Market Committee:

If you hear in the FOMC statement or in Janet Yellen's press conference any commentary on financial conditions, here is a chart of the Goldman Sachs Financial Conditions Index that they are likely referring to with a lower level being easier:

GS US FINANCIAL CONDITIONS INDEX

Following all the stock market sentiment data I talked about yesterday where there is 'euphoria' on the retail/individual side relative to data points seen over the past 20 years, today's institutional measure from II saw Bulls rose 3.4 pts to 50.5 off the lowest level since November. Of that, 1.2 pts came out of the Bear side as they fell to 19, a 4 week low. Those expecting a Correction dropped 2.2 pts to a 6 week low. At least from using this indicator this year, we've seen the market stall when Bulls have gotten to 60+ and we've seen rallies when it's gotten to 50 or below. Now, as stated yesterday, we have a very bulled up individual investor even though it certainly doesn't feel like it for those who remember 1999/2000 but the numbers are the numbers. Investors Intelligence keeps making a sentiment comparison to 1987 saying "the recovery in bullish sentiment follows the 1987 pattern, suggesting there's elevated risk for a drop in September or October." I'm not going there when it comes to someone's crash prediction.

After an encouraging 10.9% jump in mortgage applications to buy a home last week, it gave it all back and then some this week with a 10.8% w/o/w drop. It's higher by just 1.9% y/o/y and the index sits just above the weakest level since February. I've talked for many months about the possibility that we've reached an inflection point with respect to pricing in that buyers have become more sensitive to persistent 5-6% gains. The average going back to 2000 that I have data on has the average annual home price gain at 3.5% (that of course covers the bubble, crash and aftermath). Refi applications fell by 8.5% w/o/w, also giving back last week's 8.9% rise and remains down 35% y/o/y. Mortgage rates were little changed w/o/w.

Ahead of the Fed's QT announcement today, I want to remind everyone that with the median home price at a record high (pricing many out of the market but raising the equity value for those that own) and rental gains still running at 4% (persistently rising above average hourly earnings), the Fed owns about 1/3 of the MBS market totaling $1.7 Trillion. The politics of this for the Fed would be messy from those young families that want to own a home and are renting instead if only they fully understood what the Fed has done.

Japan reported better than expected trade data as exports jumped by 18.1% y/o/y in August, above the forecast of up 14.3% and that is the fastest pace of gain in almost 4 years (it was though off an easy comparison of down 9.6% last year). Volumes were also pretty solid as they were higher by 10.4% y/o/y with an 18.1% rise in exports to the US (led by a 28% rise in autos just as the US market had too much inventory and right before the hurricanes) and almost 16% gain to China (driven by electronics). Volume exports to the EU were a more modest 2.9%. Imports were higher by 15.2% y/o/y vs the estimate of 11.6%. Most of this though was FX and price as volumes were up just 2.4% y/o/y. Bottom line, the data points to a good month of business for Corporate Japan but a spike in auto exports to the US is just not sustainable at this stage of our economic cycle. There was really no response in the JGB market to the data while the yen is higher vs the US dollar along with most other currencies. The Nikkei was dead flat.

The UK consumer sucked up the drop in real wages with a 1% m/o/m rise in retail sales ex auto fuel, well more than the estimate of up .1%. Online sales helped with a 5% m/o/m rise and internet sales make up about 15% of total sales. There was a nice lift in the sales of jewelry and watches which typically implies tourist buying likely buoyed by the weak pound. Sales of clothing, footwear and household goods were down m/o/m. Bottom line, this figure is a nominal number so it does reflect "strong price increases" according to ONS (who produces the data). But they also said "we are still seeing underlying growth in sales volume, and with strong growth in non essential purchases." That said, they said there needs to be a strong rise in sales in September in order to see Q3 growth in consumer spending from Q2. On the sales beat relative to expectations, the pound is rallying but Gilt yields are little changed as is the FTSE 100.

Knowledge@Wharton asks "After Equifax, Can Our Data Ever Be Safe?" 

"Speculation, like most activities, is an art and a science. Attempts to answer the pivotal question of speculation invariable raises twice as many questions as it solves. "

--Victor Niederhoffer

Barry Ritholtz's "Masters in Business" conversation with Victor Niederhoffer on Bloomberg is a fascinating interview because of the subject matter.

Niederhoffer is a complicated and controversial person. I have had some interaction with him as prior to the Great Decession in 2008 he was publicly critical of my economic and market concerns that I expressed on Real Money Pro as well in my television appearances (mostly on CNBC).

Niederhoffer Investments returned 35% a year from inception through 1996, when MAR ranked it the No. 1 hedge fund manager in the world.

In statistical terms, I figure I have traded about 2 million contracts, with an average profit of $70 per contract (after slippage of perhaps $20). This average is approximately 700 standard deviations away from randomness.

From there his life took some interesting turns, with all his personal irregularities.

Here are some more interesting features of Niederhoffer's resume:

* A graduate of Harvard and University of Chicago, he has made and lost several fortunes.

* Niederhoffer ran Soros' fixed-income operations.

* He was a Berkeley professor in finance and statistics.

* Niederhoffer was a five-time National Squash Champion and one-time World Champion. Indeed, he has been named the best amateur champion ever.

* He was in the top 10 players in racquetball in the U.S. for numerous years.

* Nassim Nicholas Taleb has called Niederhoffer the most brilliant person he has ever met.

* Author of "The Education of a Speculator." (I have read this book five times)

* Invented the notion and analysis of multi-variant time series in markets.

* Niederhoffer invented the first computer-trading program.

* Niederhoffer famously had a homeless person live in the basement of his Greenwich, Connecticut, mansion so he could feel the pulse of the common person and this could aid him in trading and investing.

Let's go to this fascinating podcast, which discusses Niederhoffer's life and family as well as the harmony, complexity and the difficulty in trading markets. 

Morgan Stanley has lowered Allergan (AGN) from overweight to neutral ( $228 price target), which is in marked contrast to the enthusiasm expressed recently by both J.P. Morgan and Wells Fargo in upbeat views.

When I get a copy of the research report I will be able to comment.