DrStool Posted February 1, 2023 Report Share Posted February 1, 2023 Yes, today is the day the Fed catches up with the money markets. Since the last Fed increase in the Fake Funds rate, which is used by absolutely no one except a few banks doing fake trades, the 13 week T-bill has risen by approximately 40 bp. The 4 week bill has risen by around 30 bp. The Fed's straw people are saying .25. I don't know and I don't care. Rates are a barometer of market tightness. Market tightness is determined by the interaction of the supply of money (credit) with the demand for money (borrowing). Demand creates supply in the banking system when banks lend. But the Fed has a history of creating more money than the banks through QE. It has reversed that in the last year, withdrawing money from the system by QT. That puts more pressure on the banks who have their deposits being withdrawn and still need to lend money, particularly to the US Government, but other borrowers as well, as credit demand has remained strong. Thus rates rise. So the tendency toward tightness continues. But the new wrinkle is the fact that the debt ceiling is now cutting the flow of Federal Government paper into the market. That means less paper for investors, banks, dealers, and funds to buy. At the same time, the Treasury will likely be paying down some paper. This will put cash back into the accounts of the former holders of the paper. So more cash in the market. Less debt supply. Voila. Rates moderate. The Treasury paid down a couple hundred billion in T-bills in December. Rates stopped rising. Now they've sucked some of that cash out again in the past two weeks, but in the weeks ahead, expect more paydowns. That will keep a lid on money rates. There's been a lot of discussion here about inflation. As you know, I think that thinking about that is irrelevant. As the Fed shrinks the amount in the money in the system, inflation has already reversed. Housing prices and rents are headed down. That's deflation, not inflation. But again, traders should focus on the supply and demand for money. That's what determines market trends, not theoretical narratives about inflation or the economy. Inflation Indices Inflation Rates Another real time inflation measure is average mortgage size issued weekly. That's down 10% since last March. When has that ever happened? Once before 2008-09. Remember that? Suppressed mortgage rates for 12 years under QE were inflationary for housing. Higher mortgage rates under QT are deflationary. Bond yields, not short term interest rates, drive mortgage rates. They should ease while the debt ceiling is in place. Home sales and prices will have a false spring. If you been thinking about selling, this will be your opportunity. This one is real time. Data as of last week. See the beginning of the false spring when bond yields fell last month. Now back to our regularly scheduled programming. Today the market will gyrate in advance of Dr. Jay mumbling some horseshit in front of the teevee cameras as Wall Street's finest PR flacks toss softball setup questions for Holy Jaysus, blessed be he. He'll hit some out of the park, and muff a few, and the market will react stupidly each time. Tomorrow, we return to trend. So sit back, grab some popcorn, and enjoy the show. I placed my bet on Monday based on the swing trade charts, so I come in long today. Long and wrong, lose a lot. Long and right, sleep well tonight. Since today will be a day of stupid, useless meanderings, it would obviously be perfectly suitable for my comments. But for now, I will refrain. Maybe later I'll have something particularly dumb to say. Meanwhile, please subscribe to Liquidity Trader if you want serious analysis and insight! Subscriber attrition is starting to bite me (ouch). It always happens in extended rallies, as people often join because they want bear porn. When I can't oblige they get sad and cancel me. But I cannot tell a lie. I can't give bear porn unless I'm really feeling it. So please give my pieces a chance. Chances are you'll be glad, not sad! I'll do a quick update in Liquidity Trader on near end of month withholding taxes later today. That will give you a framework for viewing Friday's BLS bullshit. Their adjustment process results in randomized artificial impressionist art on the first release for the recent month. For moron the markets, see: Swing Trade Screen Picks – Bulls Win This Week January 30, 2023 Stock Market Heads for the Super Bowl – Oddsmakers Pick the Bulls January 30, 2023 Gold Takes a Breather January 27, 2023 Composite Liquidity Should Be Bearish, Here’s Why It’s Not Right Now January 26, 2023 Swing Trade Screen Picks – Energetic Buys and ShortsJanuary 23, 2023 Nothing is BrokenJanuary 23, 2023 Gold Going Higher January 18, 2023 Swing Trade Screen Picks – Whoa! Just Wait Till Next Week! January 17, 2023 Long Live the Bear. The Bear is Dead January 17, 2023 A Funny Thing Happened on the Way to the Debt Ceiling January 16, 2023 Withholding Taxes Are Soaring January 6, 2023 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. 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SiP Posted February 1, 2023 Report Share Posted February 1, 2023 that would be a bullish change becasue market would think that Fed could change the pace of rate rise, and even cut when economy would be hit and be in recession. "Some anal cysts do expect the Fed to remove from its policy statement the current, open-ended promise of "ongoing increases" in interest rates, a phrase used since the central bank began its tightening cycle in March. Any new language, however, would still leave the door open for further increases depending on incoming economic data, particularly on inflation and jobs." https://www.reuters.com/markets/rates-bonds/fed-expected-deliver-small-rate-hike-keep-anti-inflation-tilt-2023-02-01/ Link to comment Share on other sites More sharing options...
DrStool Posted February 1, 2023 Author Report Share Posted February 1, 2023 Had a very large number of final swing trade buy signals in my trading screens today. Final buy is the second or third of the past week, using both price cycles and up and down volume cycle criteria. Link to comment Share on other sites More sharing options...
DrStool Posted February 1, 2023 Author Report Share Posted February 1, 2023 Might be garbage. Might not. Link to comment Share on other sites More sharing options...
fxfox Posted February 1, 2023 Report Share Posted February 1, 2023 FED makes mistake today and hikes 0.25, BUT announces acceleration of pace of balance sheet reduction. Link to comment Share on other sites More sharing options...
WTF Posted February 1, 2023 Report Share Posted February 1, 2023 UST yields down across the board, Dollar down, Gold up, Oil up... wonder what JP and the other FR clowns think about that slap in the face? Link to comment Share on other sites More sharing options...
Jimi Posted February 1, 2023 Report Share Posted February 1, 2023 Hot ISM. Link to comment Share on other sites More sharing options...
fxfox Posted February 1, 2023 Report Share Posted February 1, 2023 12 minutes ago, Jimi said: Hot ISM. So la la, ISM PMI was worse than expected, but employment component up. JOLT's was up more than expected. Link to comment Share on other sites More sharing options...
WTF Posted February 1, 2023 Report Share Posted February 1, 2023 AMD racing higher on decreasing volume. When this tops and starts to roll back down should get some downside action on the NASDAQ. Link to comment Share on other sites More sharing options...
DrStool Posted February 1, 2023 Author Report Share Posted February 1, 2023 Razor's edge. Link to comment Share on other sites More sharing options...
WTF Posted February 1, 2023 Report Share Posted February 1, 2023 TSLA having back tested $175 from underneath looks to be headed down... but it can turn and recover all its losses in one 10-minute candle. Like playing with dynamite.... be careful. Link to comment Share on other sites More sharing options...
DrStool Posted February 1, 2023 Author Report Share Posted February 1, 2023 Word of the decision has been leaked, and the leakees don't like it. Link to comment Share on other sites More sharing options...
SiP Posted February 1, 2023 Report Share Posted February 1, 2023 Polish WIG20 (blue chips) was one of the leader of rally since late september. Since 9th JAN keep consolidating and now just want to break to the...downside. Link to comment Share on other sites More sharing options...
DrStool Posted February 1, 2023 Author Report Share Posted February 1, 2023 Non event. Link to comment Share on other sites More sharing options...
fxfox Posted February 1, 2023 Report Share Posted February 1, 2023 https://www.forexlive.com/centralbank/watch-live-powell-hosts-fomc-press-conference-20230201/ Link to comment Share on other sites More sharing options...
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