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Disjointed Crap Stock Market and the Fed RRP MMF Rescue Fund 5/24/22

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Over the past 3 days, the hourly chart of the ES, S&P 500 24 hour futures has become increasingly disjointed and incoherent. This is a symptom of the growing shortage of liquidity. It reflects the inability of dealers and other big players to maintain narrow spreads. The market has no depth because the cash isn't there. It's all in the Fed's RRP fund for MMFs, where money that came out of redeemed T-bills goes to hibernate.  That fund, which is essentially a Fed money market fund for money market funds with nowhere else to go, eclipsed the $2 trillion benchmark yesterday for the first time, thanks in large measure to the US Treasury's ongoing campaign of paying down T-bills. 

The scary part is that money managers either can't use that cash for anything else because they're money market funds, or else they don't want to deploy it elsewhere. Sensible people. As long as that Fed RRP fund keeps growing, or even just stays level, it's bad news for stocks and bonds. 

I get into that in detail, with lots of charts and explanation in the Liquidity Trader Money Trends reports . It will leave you with no doubt about where all this is headed as time and policy moves progress toward the ultimate climax and denouement of decades of monetary policy mismanagement, malfeasance, and immorality. 

Treasury balance_9153_image001.png

Meanwhile, back at the hourly sit you a shun as of 5:30 AM in New York, we have this mess. Particularly for the past 2 days. But keep one thing at the forefront. For those two days, a pattern of higher lows and higher highs is and will be intact unless and until the ES breaks 3913.50. All hell should break loose if that comes to pass. 

image.png

 Even a rebound from here won't be all that bullish unless they can take out yesterday's high. We're looking at what has so far been a pathetically weak 5 day cycle up phase. Unless it shows more upside momentum today, this goose is cooked. 

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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6 hours ago, DrStool said:

Over the past 3 days, the hourly chart of the ES, S&P 500 24 hour futures has become increasingly disjointed and incoherent. This is a symptom of the growing shortage of liquidity. It reflects the inability of dealers and other big players to maintain narrow spreads. The market has no depth because the cash isn't there. It's all in the Fed's RRP fund for MMFs, where money that came out of redeemed T-bills goes to hibernate.  That fund, which is essentially a Fed money market fund for money market funds with nowhere else to go, eclipsed the $2 trillion benchmark yesterday for the first time, thanks in large measure to the US Treasury's ongoing campaign of paying down T-bills. 

The scary part is that money managers either can't use that cash for anything else because they're money market funds, or else they don't want to deploy it elsewhere. Sensible people. As long as that Fed RRP fund keeps growing, or even just stays level, it's bad news for stocks and bonds. 

I get into that in detail, with lots of charts and explanation in the Liquidity Trader Money Trends reports . It will leave you with no doubt about where all this is headed as time and policy moves progress toward the ultimate climax and denouement of decades of monetary policy mismanagement, malfeasance, and immorality. 

Treasury balance_9153_image001.png

Meanwhile, back at the hourly sit you a shun as of 5:30 AM in New York, we have this mess. Particularly for the past 2 days. But keep one thing at the forefront. For those two days, a pattern of higher lows and higher highs is and will be intact unless and until the ES breaks 3913.50. All hell should break loose if that comes to pass. 

image.png

 Even a rebound from here won't be all that bullish unless they can take out yesterday's high. We're looking at what has so far been a pathetically weak 5 day cycle up phase. Unless it shows more upside momentum today, this goose is cooked. 

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. 

Could rising RRP at  some point be painting a picture of doom for the Dollar? If there is no confidence in anything except Fed's balance sheet,  what does that say about most other dollar denominated assets?

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1 hour ago, potatohead said:

Could rising RRP at  some point be painting a picture of doom for the Dollar? If there is no confidence in anything except Fed's balance sheet,  what does that say about most other dollar denominated assets?

This is completely in line with what should happen as the Treasury pays down T-bills.

The way I look at things, it has no meaning beyond that. Markets are not predictors. Neither is this. It's just a technical issue related to T-bill paydowns. When the paydowns stop, and the Treasury starts issuing T-bills again, the RRPs will come down. Will some stay there? Yes, sure. But the RRPs are the quintessential dollar, no different than the FRNs in your pocket, other than they can only be spent when returned to a bank account from the RRP account. Which can be done on a next day basis. 

If RRPs stay high, certainly I think it will be a sign that money managers have no confidence in asset prices. But they're the point. Asset prices. It's why TA reigns supreme. Chart the asset price, and it's all we need to know. Long or short? 

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1 hour ago, potatohead said:

Could rising RRP at  some point be painting a picture of doom for the Dollar?  

Doom for the dollar? RRPs are dollars. That's all they are. They are dollars held by MMFs in their RRP  account at the Fed. So in a sense, the RRPs are an expression of confidence in the dollar, and lack of same in all other assets.

Will gold have its day as an alternative store of value, a money substitute? Maybe. The charts have to do better though.  I'll put this out there for those who have an interest. 

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