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Chaos in the Hourly Chart Bear Market, Fartcall for the Fucuture -June 30, 1974

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Looking at the fartcall anal-log for our current hourly chart of the 24 hour ES S&P fucutures, the scary resemblance to the Dow Industrials daily chart of 1973 that I showed you yesterday goes on. 

I remember it like it was yesterday.

It's now July 1974.  

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August, was relentless. Screenshot 2021-03-04 111957.png

Every day down a little. Down a little more. Down a little more. Day after day. Trading had slowed from a gargantuan 12 million shares a day, which was crushing brokerage back offices, to as little as 4-5 million shares a day. Watching the tape put you to sleep. Nobody was happy because nobody was short the market. Even the old guys I sat with in the brokerage house peanut gallery were glum. They'd get up every few minutes to pound out a few quotes on the Bunker Ramo on the customers' table. Or they'd pick up a copy of the weekly Trendline and flip through the charts. 

If a company reported earnings, one of the old men would rip off a tear sheet from the loose leaf binder and pass it around. The news ticker had a scrolling light board that we'd stare at vacantly, waiting for something big. Or we'd tear off the paper scrolling version lying on the floor when one of our stocks had some news.  

The mood was dark. It went on like that until October, when the Dow finally bottomed at 570. It had come down from 1067 in January 1973. Most of that loss came from a high of 850 in June 1974. It was a slow motion crash. Slow, relentless, and deadly. 

The Fed never intervened. 

Those were the days. 

This morning we have the makings of yet another vicious bounce courtesy of the US Treasury pumping $30 billion in cash into dealer and institutional accounts yesterday afternoon. It did that by redeeming expiring T-bills, rather than rolling them over as it typically always does. This now appears to be a feature of a campaign of weekly paydowns averaging $55 billion a week, plus another $40 billion once a month. The US Treasury is acting in loco parentis for Daddy Jaysus, who is sitting there with his thumb up his butt saying, Hey, it's all good. Rising yields signal economic recovery and confidence. A little inflation? We want more more more!"

Of course this is BS to try and calm the market. But when markets become illiquid, like this one is, calming talk is BS. Money talks. Bullshit walks. Right now Janet is doing the talking, forcing a couple hundred billion in cash into big accounts of dealers, banks, money market funds, and other investment institutions. 

Unlike Fed QE, which is mainlined into the markets only through the veins of the Primary Dealer system, Treasury bill paydowns go to everyone who holds the expiring Treasury bills. This is diffuse, low powered stuff. Fed QE is the good stuff. The pure crystal meth for the market. When the Fed pumps $200 billion into Primary Dealer accounts, they use it to immediately buy more Treasuries, or other fixed income instruments, or particularly at the margin, stocks. They love stocks because they're the easiest to accumulate, market on CNBC and through their PR subsidiary, the Wall Street Journal, mark them up and move them out. 

In contrast, when the Treasury pumps $200 billion into the accounts of a broad spectrum of T-bill holders, only a fraction of it goes to dealers who will trade that cash immediately and actively. The bulk of it goes to banks and money market funds.

They get it, stick their fingers up their butts, pull them out, sniff, and try to decide what to do about the smell before acting on it. They let a lot of it just sit there. Of they look for scarce short term paper and bid the yield down on those while ignoring the opportunity to get 1.5% on a 10 year note. 

Janet and Lord Jaysus want them to take some of that cash and buy long term Treasury paper, and thereby boost bond prices. That would take the pressure of collateral calls off dealer bond inventories, sinking under water.

But they don't get to tell the investors what to do. Instead, they send subluminal messages. "Oh, this is great. Yields have risen, so now buy bonds because, well, we're in a recovery. It's going to get worse, but you should buy them anyway. You should do it because we're such good stewards of your money. True we robbed you of the principal of your savings for the past dozen years. But we saved the stock market, and Wall Street, and the leveraged hedge fund speculators. Too bad about you having to spend your savings. But it's all good. The young people can buy houses because mortgages are free." 

Uh. Not so much. 

So, where is sport? Sport is where prices bounce in a bear market. There's no such thing as support in a bear market, so we look for "sport." To do that, I'll zoom out to 2 hour bars. 

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3720 was sport and we're getting a bounce. The chart suggests that that bounce will run into trend resistance around 3780. If that holds, or if they don't even get that far, then the next place to look for a sport bounce would be either back at 3720, or maybe all the way back to the February low at 3665. 

If that breaks, you'll need a longer term view, which I give you every week at Liquidity Trader

To post your observations, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter. 

Infinite QE Is Coming Despite Skyrocketing Economic Growth

 

Meanwhile, here's some free stuff I've written about this unfolding catastrophe. 

US Treasury Injects Another $30 Billion Into Market

 

Treasury Announces It Will Inject ANOTHER $25 Billion For $125 Billion Weekly Total

 
 

 

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Anybody here trade Amazon and have insights about it? I probably should pay more attention to it than I do. Looks it is down around 600 bucks a share from the September high, and almost a perfect 3/8

THE DOLLAR OR THE BOND The FED has to either let the Bond market crash ....or the dollar crash. It can't save both at the same time. Right now they are letting the Bond market crash.

Yah, at 156 bucks between 1/8 lines, it might be more of an options thing . . .  Was Forus the one that used to trade a huge chunk of full S&P contracts at a time, not the e-minis for people

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Here's the 30 minute bar chart in the wake of the jobs report. The report surprised to the upside. Everybody except us, that is. I had warned back in early  February that the real time data was skyrocketing, That continued through last week.

So now, the few shorts that are left are covering. The instititutional sit on it and rotate guys are rotating. They're selling Treasuries again, surprise surprise, and buying stonks.

Stonks are headed for resistance at 3800. The 2-3 day cycle projection is 3810-20. If they get there, that would break the downtrend. OR at least this version of it. Channel boundaries have been made to be broken in this broken, illiquid, market in crisis. 

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Anybody here trade Amazon and have insights about it? I probably should pay more attention to it than I do. Looks it is down around 600 bucks a share from the September high, and almost a perfect 3/8 from the Feb high to boot. It's actually one of those stocks that seems to follow MM lines fairly well and seems to like to move 3/8 or 4/8 in a direction before pausing and reversing a bit. So, my far-from-brilliant and penetrating analysis is that it could bounce from here, or continue to go down another 1/8 or so before finding a footing.   🤔

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THE DOLLAR OR THE BOND

The FED has to either let the Bond market crash ....or the dollar crash.

It can't save both at the same time.

Right now they are letting the Bond market crash.

But this won't always be the case.

Sometime "soon" they will have to open up the printing throtle and save the bond market at the expense of the dollar. 

The FED is playing an alternating game.

Saving the dollar...let the bond market crash.

Save Bonds ...let the dollar crash.

Alternating between these two states.

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6 minutes ago, DrStool said:

I'll take 100,000 shares at market. 

Yah, at 156 bucks between 1/8 lines, it might be more of an options thing . . . 

Was Forus the one that used to trade a huge chunk of full S&P contracts at a time, not the e-minis for people of meager means like me?

Added a second sliding parallel (top aqua colored line) to action-reaction lines on 15M chart this morning and it almost makes things look a little orderly. But I have absolutely zero confidence in anything I'm doing lately, so I'm over-posting random crap to avoid trading. 

 

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Just now, DrStool said:

I avoid trading by taking a nap. 

Hmmmmmm. I like where your head is at on this one. Trouble is it's 8:10 in the morning here. But, one should never say never to great ideas such as that. 🙂

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At my age, it's getting more common. And it's 4:13 PM here, or 16:13 hours as they say in your rope.

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I would have no problem taking a nap at 8:10 AM either. In fact, that's what I was doing then here. Because I fucking woke up at 4:45 and was so agitated I worked until 7:45. 

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10 minutes ago, DrStool said:

I would have no problem taking a nap at 8:10 AM either. In fact, that's what I was doing then here. Because I fucking woke up at 4:45 and was so agitated I worked until 7:45. 

I'm approaching that age where, rather than waking up agitated, when someone asks "What keeps you up at night?" my answer is "my bladder, mostly." 😄

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I'm 70. I can't even remember when that started. Late 40s I think. Now, twice a night, minimum.  It's something to look forward to in old age. 

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