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Predictable Monday 11/8/21

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I think that it is safe to predict that today is Monday. Therefore, being the first day of the business week in the Western World, we will start with a look at the 4 hour bars of the ES, S&P 500 fugutures, for perspective. It probably bears reminding that the saucer base, multiple inverse head and shoulders pattern from which the market broke out measures to around 4820. 

This falls into the category of "When You Think It's a Top But It's Really a Bottom."

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Friday's needlepoint top suggests that we won't get there today, but who am I to judge. 

Funny thing about these bottoms in a bull market. Most people can only see them in retrospect. 

I saw a headline today that Hussman says the Fed isn't responsible for the bubble, but that the fact that people think the Fed is responsible, is responsible. 

Hussman has spent the last dozen years being wrong about the market every single day. Every chart, every day, for him, is merely another example of how overvalued the market is.  And yet, some people still pay attention to him. Ah, the wages of charlatanism, even bear charlatanism, apparently pay well. 

Forever wrong permabears are hung up on the idea that the market is "overvalued." The problem is the concept of "value." In an auction market, value is what someone will pay someone else for something that someone else owns.

Are PE ratios historically high? Yes. Does that mean that prices are "overvalued?" No. They're just prices. They change every day. They always go up. How difficult is that?

Will that change someday? Yes. When? I don't know, exactly, but I have a guess, based on Rule Number One : Don't fight the Fed. The Fed has begun turning the rudder.  When the ship starts to turn, we'll know. First we'll see the little eddies, then a few little waves, the opposite way, and so on. 

But our job here is the intraday patterns, so let's downshift to the hourly view. 

Breathtaking.

There's obviously a bit of trend sport around 4690 here at about 4 AM in NY. If that fails, we have about 30 points of airspace to the next sport level. Note that the uptrend would still be intact at that point, so I'm not gonna be like Fussman and call a top every day. Lest we forget, the trend is our friend.

Until it isn't. 

So, likewise, if 4690 holds, then they'll probably run right back to 4730 today. Take that out, and 4760 would be a done deal PDQ, on the way to that measured move target of 4820.  

tvc_de9ad1d3e9e819af13d1feecd7545f04.png

 

For more: 

Relentless Rally Reaches Likely Reaction Point

Swing Trade Screens Have Buy Side Surge

Why Jerome Powell Had a Frog In His Throat

Gold Is in Perfect Equilibrium AND Maximum Uncertainty

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The Treasury is talking about ending the Primary Dealer system in the Treasury market. Keep an eye on this. It would be huge. If the Fed goes to a direct to retail model and cuts out the dealers or reduces their role, it would be the end of the market as we know it.  

That is all. 

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2 minutes ago, DrStool said:

The Treasury is talking about ending the Primary Dealer system in the Treasury market. Keep an eye on this. It would be huge. If the Fed goes to a direct to retail model and cuts out the dealers or reduces their role, it would be the end of the market as we know it.  

That is all. 

could you expand? Would this begin the process of US Government using the Fed as its checking account? Fed would be directly adding reserves in the system as well as setting accounts with the public? curious on your take

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I know nothing. Only that it's being discussed. Would probably work like the European system where Government debt auctions are open to all banks and institutions. Whether it would extend to Fed open market operations or not, I don't know. It's very preliminary. We'll know more when the make a formal rule proposal. 

Anything that cuts the Primary Dealer role in monetary policy transmission would fundamentally change how much direct impact QE has on stock prices.  It would end the Primary Dealer role in rigging the markets. 

Which is why it won't happen. They own the system, and they'll keep their role intact, is my guess. 

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I'd say the Dealers want out so now it's up the the Treasury to do it, if Yellen wants to or not. Well who knows what's behind it?  As an academic question the PD system is ripe review but only a few hundred people even know what it is.  Nobody is demonstrating outside the Treasury or Eccles building calling for change. 

What all Americans want is more money.  Now they've got it. Are they happy.  No evidently so what's needed is more money.

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29 minutes ago, Jorma said:

I'd say the Dealers want out so now it's up the the Treasury to do it, if Yellen wants to or not. Well who knows what's behind it?  As an academic question the PD system is ripe review but only a few hundred people even know what it is.  Nobody is demonstrating outside the Treasury or Eccles building calling for change. 

What all Americans want is more money.  Now they've got it. Are they happy.  No evidently so what's needed is more money.

The dealers want out from a system that guarantees their profits and rescues them when they get in trouble? They are literally just straw men for the Fed with a guaranteed skim.  

Not sure I understand your logic there. 

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3 hours ago, DrStool said:

The dealers want out from a system that guarantees their profits and rescues them when they get in trouble? They are literally just straw men for the Fed with a guaranteed skim.  

Not sure I understand your logic there. 

I am assuming this proposal would not see the light of day unless the dealers gave an OK. Let's call it cynical forensics. As to why?  I don't know. For one thing being forced to carry all that inventory can be a contributor to their troubles, past and future.  Maybe they like me see the possibility of Treasury coupon prices heading towards zero. I am sure the bigwigs despise that they have to be a part of lending the government money on the scale now required. Then too I suppose they imagine that giant corporations would exist without government and sort of wish it would go bankrupt.

 

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