DrStool Posted October 30, 2023 Report Share Posted October 30, 2023 It's FOMC circus week. The elephants are entering the ring. We know what elephants do when they enter the ring, don't we. Ringmaster Jerry and the Ratemakers will put on quite a show, and the market will ooh and ahh. In preparation, the shorts are leaving their seats this morning, and the would-be longs are taking their seats, expecting a really big shoe. Thanks to all that jockeying for ringside seats, we even have a little uptrend channel to work with this morning on the hourly ES, S&P 500 futures. The number to watch for the stadium stands to come crashing down looks like 4140. If that breaks, shorts gonna have some fun'anight. Pardon me for switching metaphors again, but in addition to being about the circus, Wall Street's relationship with the Fed is also about religion. If 4140 holds up, bulls will have their Hour of Power and sing their praises to Jaysus, for yet another deliverance from the evil bears. For the time being. Last Week I Warned of Market Crash Potential Meanwhile, over in yield land, Wall Street keeps pumping Treasuries to its customers. It's the biggest pump and dump operation in history, with a patina of respectability because these are US Treasury securities after all. They may as well be used toilet paper as far as I'm concerned. All of these Wall Street shills recommending the 10 year at 5% are the same soulless hucksters who were recommending it at 4%, and 3% and 2%. There were even people like Lacy Hunt who were shilling at the top of their lungs at 1%. Clowns and charlatans all. The same conditions that led the 10 year to go from 0.5% to 5% are still in force today. Why would anything change until those conditions change? But hey, if someone wants to lock in a 5% yield for 10 years and can hold the paper to maturity, be my guest. On the other hand, if it was money that I might need to get my hands on at some point... Here’s Why Macro Liquidity Still Signals Record Danger For moron the markets, see: Last Week I Warned of Market Crash Potential October 30, 2023 Here’s Why Macro Liquidity Still Signals Record Danger October 28, 2023 Swing Trade Screen Picks – Which is Better, Late or Never? October 23, 2023 When the Market Is Ready, an Event Will Appear October 16, 2023 Dealers Pull In Their Horns October 14, 2023 Tepid Tax Collections Mean It’s the Supply October 4, 2023 The Rhymes of History September 24, 2023 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 folder. 1 Link to comment Share on other sites More sharing options...
fxfox Posted October 30, 2023 Report Share Posted October 30, 2023 Very good reports! Thank you Doc! Link to comment Share on other sites More sharing options...
DrStool Posted October 30, 2023 Author Report Share Posted October 30, 2023 7 minutes ago, fxfox said: Very good reports! Thank you Doc! 😊👍 Link to comment Share on other sites More sharing options...
DrStool Posted October 30, 2023 Author Report Share Posted October 30, 2023 Link to comment Share on other sites More sharing options...
Takachi-1 Posted October 30, 2023 Report Share Posted October 30, 2023 Saturday's Liquidity Trader is a superior writeup Doc, quite clear and balanced in its exposition of possibilities. Well worth the price of admission - thx! Link to comment Share on other sites More sharing options...
Takachi-1 Posted October 30, 2023 Report Share Posted October 30, 2023 trying to noodle thru the implications of the election cycle..... the Fed always supports the in place government in the election year with liquidity, questions would seem to be when they initiate an new round of QE in concert with the processes you describe. Link to comment Share on other sites More sharing options...
Jorma Posted October 30, 2023 Report Share Posted October 30, 2023 19 minutes ago, Takachi-1 said: trying to noodle thru the implications of the election cycle..... the Fed always supports the in place government in the election year with liquidity, questions would seem to be when they initiate an new round of QE in concert with the processes you describe. The Fed will provide liquidity at any time, under any party. Even if it comes to pass that the US is a single party state. Link to comment Share on other sites More sharing options...
DrStool Posted October 30, 2023 Author Report Share Posted October 30, 2023 41 minutes ago, Takachi-1 said: Saturday's Liquidity Trader is a superior writeup Doc, quite clear and balanced in its exposition of possibilities. Well worth the price of admission - thx! My observation has been that it isn't necessary to anticipate. The market responds to actual changes in liquidity. To the extent that some correctly anticipate the change, the advantage is too small to be worth the risk, in my opinion. The vast bulk of the move, i.e. the trend, happens on the actuality of the liquidity flow, not the anticipation of it. In fact, if you look at the 2020 Covid bull turn, it came 8 days AFTER the Fed started massive pumping operations. 1 1 Link to comment Share on other sites More sharing options...
DrStool Posted October 30, 2023 Author Report Share Posted October 30, 2023 3 minutes ago, Jorma said: The Fed will provide liquidity at any time, under any party. Even if it comes to pass that the US is a single party state. Moreso, because the State will become the de facto central bank. Link to comment Share on other sites More sharing options...
potatohead Posted October 30, 2023 Report Share Posted October 30, 2023 great report Lee. 2 questions: Could the huge spike in Repo financing back in early summer simply been a way for dealers to distribute their inventory? Could the drop in money market fund assets recently been due to the delay in filings from California's income tax due, and now late filers are simply paying their taxes? Link to comment Share on other sites More sharing options...
Jorma Posted October 30, 2023 Report Share Posted October 30, 2023 2 minutes ago, DrStool said: Moreso, because the State will become the de facto central bank. Something like that. The Fed has only begun to print. That is if the system is to survive. Link to comment Share on other sites More sharing options...
DrStool Posted October 30, 2023 Author Report Share Posted October 30, 2023 26 minutes ago, potatohead said: great report Lee. 2 questions: Could the huge spike in Repo financing back in early summer simply been a way for dealers to distribute their inventory? Could the drop in money market fund assets recently been due to the delay in filings from California's income tax due, and now late filers are simply paying their taxes? I try to focus on the macro, whether cause, effect, or correlation. The whys are sometimes obvious, sometimes obscure, but it is the "what" that matters. Total money fund assets did not drop, only institutional funds went down for a week. No idea why. The spike in repo financing I think came when the debt ceiling was lifted and Treasury issuance soared. Dealers had to use repo to buy the tsunami of new issuance. My guess. They are no longer willing to do so, which is why the risk of a crash is so great. Link to comment Share on other sites More sharing options...
Jimbo Posted October 30, 2023 Report Share Posted October 30, 2023 BANK OF AMERICA Already lost half its market cap. I wonder what its real NTA is???? Link to comment Share on other sites More sharing options...
potatohead Posted October 30, 2023 Report Share Posted October 30, 2023 1 hour ago, DrStool said: I try to focus on the macro, whether cause, effect, or correlation. The whys are sometimes obvious, sometimes obscure, but it is the "what" that matters. Total money fund assets did not drop, only institutional funds went down for a week. No idea why. The spike in repo financing I think came when the debt ceiling was lifted and Treasury issuance soared. Dealers had to use repo to buy the tsunami of new issuance. My guess. They are no longer willing to do so, which is why the risk of a crash is so great. Appreciate your objectivity. Excellent commentary as always. Very easy to get caught up in the speculative side. Link to comment Share on other sites More sharing options...
fxfox Posted October 30, 2023 Report Share Posted October 30, 2023 Feels like summer trading today —> Ill liquidity Link to comment Share on other sites More sharing options...
Recommended Posts