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Thou Shalt Not Fight the Central Banks 10/31/22

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They're trying to hold this rally together as we start a new week. Hope springs eternal in the hearts of bulls. 

I note on the hourly chart of the ES 24 hour S&P fuguetures that this is the turd wave of this rally. Each of the two previous waves have had tree up days. We're now in the second day of this one. The turd coincides with (sound of trumpets- ta da da daaaaa) the FOMC meeting.

Meanwhile, the 5 day cycle projection was 3910. That's done. So we're set up nicely for a downturd on Wednesday just in time for the circus, and Ringmaster Jay Pee's Dog and Pony Show, with the assembled lapdog media. 


Although I'm not yet confident that we have a sustained downtick immediately ahead

This morning I have been working on a Composite Liquidity update for Liquidity Trader subscribers. I'll post that later this morning in the USA. I'll be a bit late with the Precious Metals and Swing Trade picks updates.  Not enough time to get them in today so look for those tomorrow. 

I've dug a little deeper into the combined Big Three central bank balance sheets in the Composite Liquidity update, that we took a look at on Friday. I'll share a bit of that with you here. 


Another way to look at this is on an unadjusted total basis, using each series indexed from a fixed date, in terms of percentage change from that point. I used January 2009.

Useful, don’t you think?



This year it appeared that stocks front ran the central banks (CBs) in January. But it’s about the growth rate of CB assets. Slowing the growth rate is an effective tightening. In fact, outright Quantitative Tightening is historically rare. Normally, just slowing the growth rate of money is enough to bring on bear markets.

The chart below shows the monthly percentage change of the Big Three central banks total assets vs. stock prices. Seems like 1% has been the magic number since 2017. That’s a 12.7% annual rate. Think of it. Central banks must grow their balance sheets by 12.7% per year just to tilt the playing field enough to keep bubbles inflating. Lower than that, they deflate.

The required pump rate can change over time, depending on how much money demand central governments, particularly the US Treasury, are placing on the market. If economies weaken and governments need to borrow more money to fund their budgets, the central banks will need to print more to absorb it. Otherwise stock and bond prices will fall at a greater trend rate.



For now 1% is it, and they’re way below that. Until there’s a concerted change toward ease by at least two of the Big Three, I would assume that all rallies in stocks and bonds are bear market rallies. Any market speculation to the contrary is bound for disappointment.  

Previous Liquidity Trader reports. 

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37 minutes ago, SiP said:

eurusd coming to support and down trend lines


As the ECB begins QT, EUR and USD should come more into equilibrium.  Maybe a range of 97-98 to 102-03. 

Then it will depend on who blinks first. Poopwell, or La Garderie.  

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44 minutes ago, SiP said:

This looks nice 736 bln USD just for interest of UST debt


Out of $31T in debt $6.7T (~22%) is owned by the government and $5.5T ($18%) by the Fed. So what we actually pay out net is less considering the 22% the government owns. The Fed usually remits their share less operating expenses to the Treasury But that's now turned into a black hole.


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58 minutes ago, sandy beach said:

Out of $31T in debt $6.7T (~22%) is owned by the government

$24.4 trillion is a lot. And I think that a lot of that $6.7 trillion is government employee pension funds. They still need to pay the interest on that.  

From yesterday's Daily Treasury Statement


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Not only bears are their own worst enemy, bulls too. When an almost not visible hint of maybe less strong rising rates is enough to bomb markets higher…

if we would be at 3200 Poopwell would be some kind of dovish, but now? Not so much. If he would be really dovish on Wed we would be at 4800 by christmas.

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8 minutes ago, fxfox said:

If he would be really dovish on Wed we would be at 4800 by christmas.

They'd run out of money first. Bear markets descend on the slope of hope. 

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