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Ben's Excellent Adventure

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And she'll have fun fun fun
Til her daddy takes the t-bird away.
The Beach Boys "Fun Fun Fun"

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.
-Donald Rumsfeld.

The destruction of a currency does not follow a straight, predictable course, like a cancer.
-G. Carl Wiegand, The Great Inflation, Germany 1923 -- U.S.A.?

A scatterplot is a mathematical diagram used to display values for two variables for a set of data.

A scatterplot is used when a variable exists that is below the control of the experimenter.

In the current market, there are two experimenters, the Fed and the market participants.

No one knows if Mr. Market has truly discounted Taper. The Street thinks it has come to terms with it. He threw a hissy fit in June, and according to the "elders on Wall," he has gotten over it. But no one really knows for sure. The ramifications of the Fed programs over the last few years and of the Fed's attempt to unwind are unknown knowns.

What makes the market so vexing here is that it doesn't just react to what happens, the market discounts what it THINKS is going to happen. Is it market participants discounting what they think will happen or is it the great spiritus mondi of the crowd, the coming together of mass psychology that subconsciously is discounting the future?

It's important where the market is at the moment, but it's more important whether the market has discounted the future. I can't help but feel that in this age of immediacy that the focus is virtually entirely on the now and that the market as a discounting mechanism has been corrupted, subverted, and preempted.

This is what happens when you have natural born manipulators in a free market.

Is it possible that the Two Put Puts, the Greenspan Put, and the Bernanke Put have fostered a propensity for the here and now at the expense of the tomorrow?

Have spokes been thrown into the market wheel?

I can't help but think that the focus on short-termism -- whether it be on the corporate side and engineering earnings with cheap money to buy back stock or whether it be in politics with Congress and the Administration lurching from crisis to crisis -- won't leave players surprised in 2014.

After all, has there ever been a great market melt-up like we've seen in the last few years that hasn't ended ugly?

Yet, despite more than two years without a significant correction, apparently many of the best and the brightest amongst Wall Street strategists are playing the extrapolation game and expecting back-to-back stellar years with another barn burner in 2014.

Click to enlarge

There is not a bear amongst them? So, why are these folks smiling?

Sometimes you just have to parrot Billy Ray: "Sounds to me like you guys a couple of bookies."

As traders we are dealing with two big variables:

1) Whether the market has or has not discounted the future.

2) The Theory of Reflexivity, which posits that market participants thinking about the very discounting of the market and acting on it may have an effect on the discounting mechanism itself. In other words, the act of acting in the market place has an outcome on the normal expectations.

This is what makes forecasting so difficult using "information" as opposed to the more esoteric analysis of the Law of Vibration, time and price harmonics, and the Wheels of Time methodologies we use.

Coming up is Bernanke's last Fed meeting. Ben comes out of the bunker shortly and gets to sell a book. No one will hear the quiver in his voice as he tells the story -- unless they do an audio version with his truly. The market has come down to the wire with a few days to go until the tape contracts before the holidays.

Yesterday's whiplash, where the S&P (INDEXSP:.INX) futures were deep in the red and then up 10 as the bell rung, likely buys the bulls time, keeping the market buoyant into year end.

It wouldn't surprise me to see a bulge to kick off the new year, a kind of mirror-image fractal to Monday morning, with false strength in early January acting as a "miss-direction."

Yesterday's report walked through the symmetry with October 1972 and the false breakout into January 1973.

2014 will be 70 years from the Bretton Woods Agreement, which was unwound with the Nixon Shock of August 1971. Gann students will note with interest this 70-year period as panics often times play out on the "seventh." Such was the case in 1907, 1937, 1987, and the crisis that began in 2007. Of course, 2014 is a "7 year" in as much as it is the 7 X 2 year since the 2000 top.

The average life expectancy of a fiat currency is 42 years based on the last several hundred years of history. 2013 was 42 years from the 1971 Nixon Shock.

Conclusion: The Emperor is gone, long live the Emperor. "Take down this wall of worry, Mr. Bernanke" looks like "mission accomplished" as the popular consensus is that if a pullback comes in 2014, it will be a garden-variety affair in the neighborhood of 5% offering a great buying opportunity. I'm not so sure. 2014 may be the year that Janet takes the T-Bird away.

I think 2014 will be a year when reversion to the mean hits the market and we see at least a 20% sell-off.

Strategy: Despite Monday's strength in the indices, many glamours acted strangely. The entire tape felt strange. Names like Deckers Outdoor (NASDAQ:DECK) and Illumina (NASDAQ:ILMN) started up smartly from buy setups but faltered. Underneath the surface, someone is selling, or at the very least, there is not fresh money that is inclined to chase. The M.O. amongst those money managers who have beat the index this year is "do no harm" while it is probably too late for those behind the curve to throw another Hail Mary pass like the spiral off the October 9 low.

What would Monday's "reversal" have looked like without the ramp in THE 800 pound gorilla, Exxon Mobile (NYSE:XOM)? What does its action yesterday say about money managers hiding out and playing defense until the bell on 2013 rings?

Daily XOM Chart from November 14:

iShares Russell 2000 Index (NYSEARCA:IWM) broke out over short-term hourly resistance for December but has not recaptured the last breakdown pivot around 112.

Hourly IWM Chart:

Form Reading Section:

OncoMed Pharmaceuticals (NASDAQ:OMED) Chart:

Twitter (NYSE:TWTR) Chart:

POSITION:  No positions in stocks mentioned.