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Stock Market on Fire 7/29/22


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Stocks are on a roll. The 5 day cycle projection on the ES, S&P 500 24 hour futures has risen to 4115. This morning's high of 4108 is close enough for government work, especially in view of the fact that the conventional measured move target of the base breakout was 4100. The breakout from the higher base this week only pointed to 4085. So the bear killers' work is done here. The shorts have been squeezed to a pulp. 

If they do manage to pop this boil at 4109, then multiple resistance trendlines at 4120-25 should be the endpoint. 

yn34l

I suspect that will now leave a vacuum of demand, as bulls alone will lack the firepower to keep this going without the shorts. I cover the reasons for that here.  Look, it's not bedtime reading. Unless you like having nightmares. 

To understand and profit from the big picture check out the following. 

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Sandy Beach mentioned money market funds. Some interesting data here. Not as much growth as you'd think. Retail funds only up $85 billion since December per FRED data, and the OFR shows a persistent decline in government MMFs over the same time frame. This includes institutional MMFs, which are twice the size of retail funds. 

image.png

ICI has granular weekly and monthly data. It shows Retail funds up only $40 billion since March, when short term rates began to rise sharply. All of the gain was in non government MMFs. Government MMFs declined. 

yn3sx 

Another OFR data set shows how the Treasury's T-bill paydowns forced the MMFs out of their T-bill holdings. That money went straight into the Fed's RRP fund for MMFs. 

image.jpeg
MMFs are really a sideshow to the main event, the Primary Dealers. That's what I focus on in my research. They're the house. They run the markets, normally on behalf of the Fed. But the narcissists at the Fed no longer have any use for their strawmen dealers. So the Fed has abandoned them to the whims of their institutional customers. 

The Bond Rally That Fooled The Majority And Didn’t Help Dealers

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This came in the Syphma daily newslater.

Do you think maybe they're too smug with this "priced in" shit?

July 29, 2022
   ⋅ 
SIFMA SmartBrief
News on the capital markets  

Morning Bell
 
Equity investors appear to have priced in a recession, with many seeking bargains amid an economic contraction. Stock futures are up in the wake of news of a second consecutive quarterly GDP decline, with the S&P 500 on track for the best month since 2020.
Full Story: Bloomberg (7/28),  The Wall Street Journal (7/29) 
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38 fibo at 4090, that would be to prominent for a top, 4125 or so would be ok. Short at the close today with good risk/reward. Number of stocks trading above their 50 DMA already at almost extreme levels, but not to the downside… 😇

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2 hours ago, DrStool said:

The 10 year yield is breaking down. Look at that top pattern. 

yn6sm

Hard to believe, Harry.  

Yep. The Fed raised interest rates this week. Every expert says. Never mind the numbers.

I've been saying, the Fed has lost control but lucky for them nobody has noticed. I'm not breaking out the Joy Division hiwever. Not my thing.

 

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I'm not sure how much short interest there is in Treasury coupon securities plus strategies  to profit from rising rates, some sort of synthetic shorts. ( I don't mean the polyester ones Lee wears to the beach.)  If there is a significant amount of short interest left and it starts to bail?

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