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Market Sells Off, Therefore There Must Be a Raison du Jour 7/20/21

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So we had a nice selloff yesterday. 2% woop de doo.

The pundits got busy early, when Your Rope failed to mount its usual recovery from Asian selling. It's the Delta Variant, they said. I wonder what they'll say about today's rally.

Oh, the Delta Variant is no big problem in the US or the EU or China or Japan because most people are vaccinated and in the US only dumbass anti-vax Trump supporters are dying. The Trumpist politician anti-vaxxers are apparently leading a Republican voter self suppression campaign. More power to them. 

In view of the fact that the Fed and US Treasury are in the process of pumping $168 billion into the market this week, I must admit that yesterday's selloff is a head scratcher. Normally, the market rallies during the Fed's regular monthly MBS QE settlement week. That's when the Fed settles its recent past MBS forward purchase contracts. This week the total is $128 billion, with $102 billion already done, and the rest settling tomorrow. The Fed is of course also doing its regular weekly Treasury purchases totaling $20 billion per week.  On top of that, the US Treasury decided to pay down more T-bills this week, a total of $48 billion. 

So the big guys are pumping a ton of cash into the market, and yet stocks sold off? Where'd the money go? Obviously, longer term Treasuries, which broke out in price, and broke down in yield. The ingredients are in place for more of that. I give the lowdown on that here, along with what to do about it.  If you don't subscribe yet, you can read these reports for 90 days risk free. Click here for details

So what about the stock selloff? We do have some history of Fed QE MBS settlement week failing to generate a rally. What it inevitably leads to is a delayed reaction- a monster rally after the selloff peters out. 

That leads us to this morning's chart, where the ES fucutures are already 52 points above their afternoon low yesterday. They've broken the 2 day downtrend channel, and have a 2-3 day cycle projection of 4300-05. There's also a thicket of resistance there. Meanwhile spport is indicated around 4260-64. If bears retake that, then a test of the low should be forthcoming. But if there's no pullback here, then 4300 looks like a given, and given all that Fed and Treasury cash hitting dealer and other institutional accounts, probably a lot more. 

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Meanwhile, as for the longer term stock market technical outlook - Here’s What Friday’s Selloff Means for Our Future

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BONDHOLDERS....SUE THE FED

Where are all the class ations from the Bondholders against the FED.

They have all lost a fortune from all the printing.

Uncle Warren's great Oxy deal has been turned into a bad deal by the FED.

Whats 8% return when inflation is 6% and about to go to 10% ....thats a minus 2% return per annum for the next ten years, a 20% haircut a loss of $2 billion on the $10 billion invested. 

Thats what happens when you dont "FED proof" your deals against inflation.

(and a great deal for the common share holders...........who would have thought that the virus would have rescued the Oxy management???)

Chevron had an great oportunity to swallow Oxy cheaply in early 2020 .....and blew it!!!!!!!!!!

Where are all the lawsuits????????

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sooprize sooprize sooprize

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5 hours ago, DrStool said:

They've broken the 2 day downtrend channel, and have a 2-3 day cycle projection of 4300-05. There's also a thicket of resistance there. Meanwhile spport is indicated around 4260-64. If bears retake that, then a test of the low should be forthcoming. But if there's no pullback here, then 4300 looks like a given, and given all that Fed and Treasury cash hitting dealer and other institutional accounts, probably a lot more. 

 

 

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5 hours ago, Jimbo said:

JUST TOO WEIRD FOR WORDS

TIPS have negative yeilds of minus 2%

How is that even remotely normal.

Who buys this stuff??????????

Bond masochists!!!!!!!!!

Who buys this stuff??????????

Answer:   Them that can counterfeit currency all day-every day, et al.........Cui bono........

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The Fed has been directly buying or indirectly funding 95% of net new issuance since Feb 23 when the Treasury started paying down T-bills and thereby reducing net issuance.  Get the big picture with regular reports with Liquidity Trader Money Trends reports

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