DrStool Posted October 20, 2022 Report Share Posted October 20, 2022 13 week T-bill rates are set in a freely traded market. They have now risen 93 basis points since the Fed last "raised" interest rates. Of course the Fed has never raised rates. It has merely tried, and failed, to keep up with the actual market. It has been persistently behind the market, and it is falling further behind. Now admittedly, it's only 2:30 in the morning in New York, so maybe this will be back down to a 75 BP increase by the time trading gets going in New York. But I doubt it. Just look at this chart. Do you see a trend? Do you see any point where the Fed actually raised rates, rather than merely rubber stamping what has already occurred in the market? The bond market is just as horrifying. I first posted the true Hindenburg omen chart about a year ago. These warnings were not new even then. What has transpired in the past year was entirely predictable 2 years ago. I know because I started warning that this was coming in August 2020 right after the top in bond prices/ low in yields. We already knew that the supply-demand conditions had worsened as soon as the Fed cut back on pandemic emergency QE. in June-July 2020. The Fed subsequently announced that it would begin tapering QE, and then, finally, it began to actually disgorge Treasuries and MBS from its holdings back into the market as of last March. At that point it was clear that this trend would only get worse. During the 12 years of QE the Fed directly absorbed or funded 85-90% of Treasury issuance. The Fed's persistent, enormous buying kept bond prices on a "permanently" high plateau (credit Irving Fischer) and bond yields suppressed at an artificial insanely low level. That gave bankers, speculators, and homebuyers a massive subsidy. It stimulated massive asset price inflation. And it massively distorted the financial markets and the public's perception of them. Asset prices would go up forever. Consumer price inflation finally called their 12 year long bluff. They did so because Congress and other legislative bodies around the world finally voted for helicopter money to the masses, instead of just showering free central bank money on bankers and speculators. That surge in the inflation of consumption goods and services finally forced the Fed to end QE and to call in its chips. Punchbowl pulled after 12 years. Party over. The Fed would not only stop buying or funding most Treasury issuance, it would actually add to supply. And it would simultaneously pull money out of the banking system and extinguish it, money that had been available to purchase Treasuries. The outcome was foreordained. Because Rule Number One, the First Commandment, has not been repealed. It is immutable. Thou shalt not fight the Fed. As a result of this market collapse that the Fed and Treasury policy makers had to know was coming, the US Treasury is now panickin. Look at that, they panickin. They've announced that they're looking into doing Treasury buybacks. When they talk about something, it's as good as done. It will definitely impact the market. The questions are how much and how long. I have an in depth report coming up on this subject, and a strategy to deal with it, later today in Liquidity Trader. As for what we usually talk about every day here at the Stool, the daily intraday squiggles of the US stock market, that bastion of free and unfettered market capitalism, read on. The ES 24 hour S&P futures hourly chart broke down out of a wedgie pattern yesterday and has now established a minimal downtrend. The market only needs to be above 3685 in the opening half hour of regular New York trading to break out of that. On the other hand, an hourly close below 3666 would reconfirm that incipient downtrend. It would suggest that the measured move implication of the breakdown of that little top pattern that preceded this move was doable. That target is 3630. A little bit of weakness here would also result in a 5 day cycle projection of 3580. That's all for now. I'm on a train to Barcelona, where I will be until Monday, then on to Toulouse before returning home to Nice. A plus tard! Swing Trade Screens – Overloaded on the Short Side October 17, 2022 On the Edge of the Abyss, Can the Market Fly? October 17, 2022 We Now Know When and Where Gold Will Bottom October 14, 2022 We Can Now Project When Fed Will Pause, But Not Reverse October 13, 2022 Look Out For the Real Fallout of Declining Withholding Tax Collections – Part 2 October 6, 2022 Look Out For the Real Fallout of Declining Withholding Tax Collections October 5, 2022 Markets Face Catastrophe as Dealers Mitigate Too Little Too Late September 26, 2022 Fed Speeds Into Dead Man’s Curve, More Black Tuesdays Ahead September 15, 2022 There Will Be More Black Tuesdays September 14, 2022 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. Link to comment Share on other sites More sharing options...
DrStool Posted October 20, 2022 Author Report Share Posted October 20, 2022 Reverse head and shoulders farms on the hourly ES. The neckline is 3708- 3710. Link to comment Share on other sites More sharing options...
The CoinGuy Posted October 20, 2022 Report Share Posted October 20, 2022 Not to pile on...😉, The last drive through 3750 didn't stick. What now? I'm sure you're tired of me having to repeat, so I'll just keep it generic. "Above 3900, Bullish. Below 3600, International Contagion Bearish." When the Daily Chart starts to appear muddled...I like to pull back to the Weekly. Perhaps we should take a look at our current Weekly Chart against 2008? Then maybe we should expand this look back in time to the Daily from...1929? After all...from day one I've said, "this is not a one and done like 2008". I'll be standing or falling by that statement. I'd imagine if they're going to step in like they did on the 13th of October, not only does that tell me there is trouble brewing in the background...their interest would also lie in keeping it together for a few more weeks until after November 8th. Didn't I hear about another SPR release yesterday? Interesting... November then. Speaking of November... If you go back ONE year, you'll find the 15th was a pivot...in time(+7/-7). And...If you go back TEN years? 3 of 3 of 3. Best, TCG oh...and... Windows for November? While October was relatively quiet... For November? I might as well just say this. From the 8th to the 24th...It's just a mess. Although, I do see two strong patterns. I'm just going to mention them and we can see how everything transpires. 11.15(11.16, flowing into 11.17) - 11.18 - 11.21(possible overflow to 11.24). 11.19 - 11.20 Let's not forget the FOMC meeting and the election. FOMC is on the 1st and 2nd of November and the election(as well as the Full Moon) follows it up on the 8th. New Moon...November 23rd. Link to comment Share on other sites More sharing options...
fxfox Posted October 20, 2022 Report Share Posted October 20, 2022 This bond crash is so devastating and severe that it must lead to something big. I do not think that the mess in the UK was „IT“. The Big One would be if the BoJ would loose control. I would not rule that out conpletely. Link to comment Share on other sites More sharing options...
Jorma Posted October 20, 2022 Report Share Posted October 20, 2022 Treasury buybacks? I can't quite get my mind around that. So the Treasury will buy back securities while at the same time issuing more new paper to pay for the purchases? Okee Dokee. There must be more too it but the articles I see don't say. Just boilerplate on how it will increase liquidly, which it won't. It will just slosh the liquid around in the bowl. Of course there is that $2TN in RRP. Maybe that has something to do with it. Link to comment Share on other sites More sharing options...
DrStool Posted October 20, 2022 Author Report Share Posted October 20, 2022 If the breakout sticks, the measured move target would be 3750. If it doesn't stick, bears get the ball back. Link to comment Share on other sites More sharing options...
DrStool Posted October 20, 2022 Author Report Share Posted October 20, 2022 Just now, Jorma said: Treasury buybacks? I can't quite get my mind around that. So the Treasury will buy back securities while at the same time issuing more new paper to pay for the purchases? Okee Dokee. There must be more too it but the articles I see don't say. Just boilerplate on how it will increase liquidly, which it won't. It will just slosh the liquid around in the bowl. Of course there is that $2TN in RRP. Maybe that has something to do with it. No. Treasury has 650 billion in cash available for just such expeditions. Forcing money out of the RRPs is another option, but separate. Link to comment Share on other sites More sharing options...
DrStool Posted October 20, 2022 Author Report Share Posted October 20, 2022 2 minutes ago, Jorma said: Just boilerplate on how it will increase liquidly, which it won't. It will just slosh the liquid around in the bowl. Of course there is that $2TN in RRP. Maybe that has something to do with it. Yes it will inject liquidity. I have a report coming this evening. Link to comment Share on other sites More sharing options...
PullMyFinger Posted October 20, 2022 Report Share Posted October 20, 2022 Truss resigned per Crapvision.com. https://www.cnbc.com/2022/10/20/uk-prime-minister-liz-truss-resigns-after-failed-budget-and-market-turmoil.html Link to comment Share on other sites More sharing options...
DrStool Posted October 20, 2022 Author Report Share Posted October 20, 2022 3 minutes ago, PullMyFinger said: Truss resigned per Crapvision.com. https://www.cnbc.com/2022/10/20/uk-prime-minister-liz-truss-resigns-after-failed-budget-and-market-turmoil.html bullish or bearish? Link to comment Share on other sites More sharing options...
Jorma Posted October 20, 2022 Report Share Posted October 20, 2022 4 minutes ago, DrStool said: No. Treasury has 650 billion in cash available for just such expeditions. Forcing money out of the RRPs is another option, but separate. Sure but they want to risk running down the surplus? How far? I guess a few hundred billion is something. Link to comment Share on other sites More sharing options...
DrStool Posted October 20, 2022 Author Report Share Posted October 20, 2022 Things like this are the exact reason that they have this pile of cash. Link to comment Share on other sites More sharing options...
PullMyFinger Posted October 20, 2022 Report Share Posted October 20, 2022 1 minute ago, DrStool said: 3 minutes ago, PullMyFinger said: Truss resigned per Crapvision.com. https://www.cnbc.com/2022/10/20/uk-prime-minister-liz-truss-resigns-after-failed-budget-and-market-turmoil.html bullish or bearish? Beats me--I have been reduced to trading 2 and 4 minute charts for several months now . . . pennies in front of the steamroller, indeed. Link to comment Share on other sites More sharing options...
Jorma Posted October 20, 2022 Report Share Posted October 20, 2022 Just now, DrStool said: 3 minutes ago, PullMyFinger said: Truss resigned per Crapvision.com. https://www.cnbc.com/2022/10/20/uk-prime-minister-liz-truss-resigns-after-failed-budget-and-market-turmoil.html bullish or bearish? The ongoing total collapse of governance in Britain? Probably bullish until anarchy takes the streets. Link to comment Share on other sites More sharing options...
DrStool Posted October 20, 2022 Author Report Share Posted October 20, 2022 Great Britain is an island. Like Sicily. Link to comment Share on other sites More sharing options...
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