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Extraordinary Market Volatility Terrifies the Most Hardened Traders 6/9/22

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Anyone who purports to know the direction of the short term breakout, You're a better man than I am Gunga Din.

Meanwhile, no such indecision in the money market, where T-bill rates show the Fed where the market actually is so that the Fed can use its rubber stamp to pretend that it is setting rates, when it really uses the Q of M to express policy. T-bill rates are the mirror. Then the Fed plays make believe with the after-the-fact increase in the Fed Funds target and the rates it pays on excess reserves (IOER) and RRPs. 


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In the long end of the market, the 10 year yield shows us the direction of supply and demand for long term Treasury paper. The trend is pretty clear. There's more supply, and less demand, and it will get even worse as the Fed executes its plan to shrink its balance sheet, which Wall Street colloquially calls QT for Quantitative Tightening.

As for me, the good old fashioned way of saying tightening, "pulling the punchbowl," also works. For 12 years the Fed intentionally promoted a bull market. Now it is intentionally promoting a bear market. The Fed always gets what it wants, pretending that it won't also get the unintended consequences.

When they happen, which is a given, the Fed acts all surprised, with its repeat historical mantra, "No one could have seen this coming." We'll some people who were paying attention and applied a bit of common sense, saw it coming and told you so. Ahem, ahem. 

So the Fed always gets what it wants, until it gets what it didn't want, and reverses policy. Bottom line, is permanent and immutable. If you know nothing else about investing and just always followed this one simple rule, Rule Number One, you would do fabulously well. You could run a hedge fund and become a billionaire, just doing this. And you need to pay nothing for learning this rule and using it. 

Rule Number One: Don't fight the Fed. 

So now the 10 year has another date coming up at 3.20. If you want to know more beyond that, click here, for starters.

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Onward to crapto. Remember, the supply of crapto is infinite. Charlatan carny barkers are constantly inventing new craptos and foisting them upon the unsuspecting, unwashed masses of true believers. Crapto is the golden calf of 21st century religionists singing the praises of these false gods. Are they finally ready to drop another load on the poor zhlubs left holding these bags of shit?

Here's a look at the weekly chart of BTC. The next leg down should target 22,000.  

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Now, if you are interested in a store of value that you can hold in your hand, and is shiny, and heavy, and yellow, and Potatohead can store it for you, then there's this.  I'll even track it for you every week, and feature someone who might profitably mine it for you for a few weeks now and then. 

To me, this looks like a bullish high base. 

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All of which leads us to the point. If you want to stay on top of the big picture, with not only clear analysis that has been mostly right for the past 22 years, but with strategic and tactical suggestions, and actual trading ideas, check out this list of summary pieces over at Liquidity Trader. 90 day risk free trial for new recruits!

If you're serious about the underlying forces of supply and demand that drive the markets, join me

If you are a new visitor to the Stool, please register and join in! To post your observations and charts, 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. 

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If they can tick above 4161, that would suggest the likelihood of an upside breakout. Probably in the next couple of days. Not a guarantee, just more likely than not.

Similarly on the downside at 4102. 

yaq9l

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And there goes the euro on news that the ECB will finally end QE. Here's the EUR/USD hourly. 

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Major currency pairs are always about central bank policy relativity. The relative tightness or ease of money creation in each market. The Fed has been much tighter, so the USD soared against the EUR but since the ECB began moving toward tightening, the EUR/USD has begun to rebound. I've been buying the EUR in the past couple of weeks as I move toward the closing date for my apartment purchase in mid July.  

 

 

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And just as quickly, the initial reaction in the EUR reversed. Shows you what I know about currencies. 🤣

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Just now, DrStool said:

SHTC hourly is turtling. 

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Everything I post is unbiased, dispassionate analysis. I have no stake in the game. No dog in the hunt. No emotion. Spock like. 

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Thanks to a reader for a generous contribution in support of the Stool. 

You can find the button to Support your local Stool Board in the right column of your computer screen, or keep scrolling down on your phone.  

In the department of There Are No Coincidence, the initials of the Stool supporter in this case are BM. 

Thank you for your support! 😁

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