Increasingly, competitive crosscurrents are creating notional Equity Directional disturbances.
A large number of Investors/Traders have convinced themselves the Federal Reserve was attempting to Bluff the Markets.
Running Indexes up off the Mid-June at the greatest rate of change in history once the SloMo began to move through its varying psychological attributes. Momo gave way to Fomo which quickly reversed off Resistance overhead.
The underlying Malfunction is beginning to see signs of light in the tunnel of love. Powell's recent admission will not repeat Arthur Burns's misdeeds of the past provided an interesting tell.
We can expect to see broader Market Ranges in the coming 90 Days as confusions abound and will be resolved.
Permit me to explain.
The FOMC Minutes were Negative as FOMC Participants observed Inflation remains unacceptably high.
Reduction of Treasury and Agency Debt was re-affirmed.
EFF vs IR @ 2.53 versus 8.5%+ - 600 Basis Points and 237% Divergence while the Objective remains 2%. If we were to factor in the BLS Basis adjustment (Jan. 1, 2022) - it is easily Double.
Although they indicated the potential for a pause may be within their purview... the catch is they remain Data-dependent. A nebulous and arbitrary hedge.
Aggressive EFF Increases with a pause somewhere on the Horizon was my takeaway.
The additional admission of a weakening Consumer provided the coup de gras for Data Dependence.
Building a better box for further confusion and delay.
EFF vs 2YY @ 2.53 vs. 3.28 does indicate a 75 BPS Hike for September, not 50 BPS - at present with the Yield Curve Inverted out to the 7's.
Where is the FED indicating they need to bring EFF... 3.5 to 4%.
I've paid close attention to the QT Schedule - which has remained rather jiggy. Prior to June 15th, we observed the Fed begin the largest reduction in some time. Effectively reducing the Balance Sheet by 881B while 90B was to have been removed by August 15th.
Remember, on September 15th they stated reductions were to increase to 60B / Month. A significant increase over notional distributions since June 15th.
Measures of Liquidity have come down significantly, clearly, the FED is concerned about a dislocation now.
MBS Markets have seized up. M2 Velocity is at its lowest reading, many Mortage lenders are on the verge of Insolvency, M2 is in its 5th month of contraction - all of this has been roundly ignored by Invertors / Speculators.
Quantitative Tightening has tread ever so lightly with the specter of a looming 100% increase in the Balance Sheet reductions per month.
The FED is moving at a glacial pace as Economic Conditions have weakened precipitously. For context, it is important to remember - Assets on the FED's balance sheet were 4.16Trillion prior to Covid.
MBS requires 90 Days to settle, The FED was buying up until June 15th knowing they had time to square into September 15th, this trick escapes Retail attention, understandably so as the FED never discloses these nuances.
For Treasuries, maturity is reached on the 15t and 30th/31st of each month, hence the rally off June 16th, there are no accidents.
Mid-Month usually generates Liquidity issues around pivotal dates for Time, squaring occurs closer to Months end.
Investors have focused solely on Rates, one-half of the real FED Agenda.
QT is more important at this point, far more.
I indicated the effective break rate for the Indices would be 3.5% for the 10 Year Yield. We saw the results of this level for the Indexes.
It is important to remember the Bulk of prior Funding from 2002 onward was done below 30 months on the curve, increasing the refunding needs exponentially. Thank Timothy Bitsberger from Goldman for this, as it was an intentional and extremely devious plan to collapse Debt over time.
QT will have an extreme effect on Liquidity at a time where Liquidity itself is coming under immense duress Globally.
The most important communique from Jackson Hole will be how it directs Monetary Tightening to take effect as Rates take a backseat to a further Liquidity Squeeze via QT.
Bulls want to believe the FED will back away - I'm leaning towards Economic Activity and its attendant Depression remain pervasive.
Sentiment will begin to worsen.
The New Congress will not be seated until April 2023.
Any hope for Stimmy direct to Citizens/Consumers is DOA until then.
Global Economic conditions are rather Dire.
Comment
DX Thru Resistance 108.76 PO
Comment
Deleveraging Monday
Comment
Key Support arrives today, the range will be interesting.:
!. Algo Stick Save Tuesday
2. Range Chop
3. Continuation thru Supports cascading lower
Trade Safa, let the players reveal themselves.
SPY to SPX a tale of two very Different Trades
________________________________________
DX New High 109.205
Comment
EU Crude Oil traded @ 4420/BBL yesterday in Natural Gas Equivalent Price
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