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Market just indicated Huge Short SignalSP500 is obviously in Euphoria. But let me just tell you about one event. Normally when we are getting stimulus from the FED, money is flowing FROM the FED to the BANKS. And that has been happening for a long time now. BUT. There is always a but. There comes a time when the flow of money switches. It starts flowing OUT OF the banks, and INTO the Fed. And this is called - A Reverse Repo. And it is right at the peak right now. The markets will look like they are flowing, but it appears to be emptied compared to previously. The amount of institutional money pouring into the Reverse Repo tops 1 Trillion, highest of all time. Basically - the Market is not goin up much longer. And the REAL money - the real money is made in the Reverse Repo. (Check into it). I am SHORT from here on out, no matter how much it continues to artificially float. Too much, time to take profit and call it a day. www.reuters.com
AMEX:SPYShort
by Shwayze
4
S&P500 Adjusted for Fed Repo Stock PurchasesSince the US Treasury Bond yield curve inversion in late August 2019, the Fed has been pumping the stock market by allowing corporations to purchase their stocks on behalf of the Fed. markets.businessinsider.com www.investopedia.com This stock buying was escalated again on Black Monday (March 9, 2020), pumping the market up further. capital.com This adjusted S&P500 chart shows an approximation of its real value, adjusted for this expansion of the US Fed Balance Sheet.
F
by enterprise1701
Liquidity Crisis/ Credit Freeze Incoming?While the talk is about the Coronavirus, many are now wondering why central banks are using tools for a financial crisis to fight off a virus. If you follow my work, we were expecting some sort of event to occur for governments and central banks to save face. We knew interest rates were going to 0 (and negative) and QE was going to be reinstalled. However, QE was a one time desperate policy to prevent another 1930's like global depression. If we went back on it, it could trigger a confidence crisis since people would realize QE did not work and that we are going to be in a QE and low interest rate policy FOREVER. Many already know this to be the case. Interest rates cannot normalize given the debt that is out there...and son to be increasing dramatically. We have seen rate cuts and emergency rate cuts by many central banks. Canada cut rates by 1% in less than 3 weeks. The Fed will be doing the same. However, the most important think to note is the liquidity being provided to the system. 1.5 Trillion to be exact by the Fed, which will increase more. We have been saying that the repo crisis beginning last year in Fall was something to watch. It meant central banks were beginning to lose control of the system. There was some bank, or banks, that was running out of liquidity and needed daily or weekly injections of money to survive. This has led to confusion on whether this is QE since the Fed's balance sheet has been increasing (we are up to 4.2 Trillion...during the 2008 GFC, we took it up to 4.5 Trillion). The Fed is saying this is not QE. Again, it really is about wording here. QE was a way for central banks to keep long term interest rates low, and provided stimulus. They did this by buying long term bonds from the banks which meant the Fed got the bond, and then cash was added into the system by entering the banks asset sheet. Repo is a way to keep short term interest rates low. The Fed is providing liquidity into the system and in return, the banks must provide collateral (they are saying it is high grade collateral ie US treasuries, but the banks could very well be giving the Fed their toxic assets). With this 1.5 Trillion dollars, we are seeing the beginnings of a liquidity issue. The system was about to freeze up and interest rates were about to spike. This has a lot to do with the fact that corporations are feeling the pinch. Especially the OIL companies. Oil has gotten decimated and many of these US oil producers are not making money. In fact, they are having a hard time just to keep the lights on. When Oil fell in 2014, banks were forced to provide loans to these oil companies to avoid massive layoffs. So now these banks have provided loans to these oil companies, loans they never would have taken, and this is why when oil falls, the financial sector tends to fall with it. These oil companies are zombie companies. They will never pay back their debt, and will need more debt to survive. Fast forward to today, and these oil companies need access to more debt to survive. Banks do not want to be loaning money right now in this environment, because most of them do not have the capital to do so, and rates would have to be high given the risk of the loans in this environment (knowing oil may remain low due to an impending recession meaning these oil companies will not be making money for a long time). This 1.5 trillion injection was the Fed saying: look, we will give you (the banks) liquidity and will guarantee you do not fail by making bad loans. Please use this money to loan to corporations (oil, cruise ships, airlines) who need this money to survive and prevent massive layoffs. This large injection is needed to keep the interest rates (the price of money) low. This is why many are watching to short the junk corporate bonds, mainly JNK and HYG. Over 50% of junk bonds are of oil companies... Once again, this is not free markets. Central banks, after leaving the Gold Standard (hard money system) now target interest rates as a way to devalue money to achieve policy goals (inflation and employment). Soft/fiat money is really a centrally planned system. If we were in free markets, the debt would be priced much higher. The Fed is facing a liquidity crisis right now and are desperately attempting to prevent a credit freeze. They have even issued currency swap lines with many other central banks in the world, who are now injecting massive amounts of money from keeping they system from freezing. Remember, because the US Dollar is the reserve currency, they can print as much money as they want and not have to worry about their debts. There is always an artificial demand for the dollar (the French called this exorbitant privilege). Hence why I believe the Russians and Chinese were attempting to target US Dollar demand even through Oil with Iran (As the US Dollar gets stronger, most nations cannot use the Dollar to purchase Oil which means Iranian Oil looks attractive since the Iranians do not take Dollars for Oil and will happily take your currency for their Oil). This is why the Fed is the central bank really for the world as they can bail anyone out by printing Dollars. So what does this mean going forward? We have a Fed meeting on the 18th. Where the Fed is expected to cut 75 basis points, but Fed futures is showing a probability of cutting down to 0. Expect QE to also be officially announced. If we are going to see more debt being issued, AND governments doing large scale relief programs and bailouts as Steve Mnuchin said they would, interest rates will have to be low and stay low for a very long time (think forever) in order to service this debt. This is not a virus issue, but a debt issue. I do expect a possible credit freeze is coming. Where all credit cards, debit cards and ATM machines stop working. Here in Canada, banks are already putting limits on how much cash you can withdraw daily. Once this occurs, government and central banks will be seen as saviours with their digital money solution. Who knows, they may even say the virus is transmitted through cash, so we must stop using cash. My readers know I have been warning about digital money for a very long time. It is coming. It will make government much bigger and much powerful. This is once again all about debt. If governments are going to essentially run everything and bail everything out, they will need more taxes. A digital money system allows governments to track and tax all money. It will be specifically targeted towards small business' who have many tax loopholes, which will be removed and then small business essentially enter the tax realm of the employee. It will be used to track and tax money restaurants receive as tips, your private jobs you do for your neighbours and other people, and also to tax your sales on Craigslist or Ebay. With digital money, you can also implement MMT, which is likely coming with this virus. Many sport arenas and other business' have been closed, and these people who work there are not going to receive money for a month or more. They either need access to more debt, OR these business' will have to provide a salary for them while they are not working. Government may very well step in and do this. The socialist economists know that giving people more money, and then this money competing for the same number of goods and services just increases the price of things since we are not increasing PRODUCTIVITY. The solution to this is excessive taxation, as a way for government to then REMOVE this money supply from the system. What they will do is use the green infrastructure and green taxes as their excuse to increase taxes on the people. It also helps in boosting the economy with government creating jobs for infrastructure projects, to the Keynesians delight. People would not make a fuss about paying more taxes because they do not want to be labelled climate change/global warming deniers. There are many other things that digital money can be used for such as only giving people money if they meet certain habits and social conditioning (eat well, exercise well etc) which means it will be governments and large tech corporations that will define what an ideal human is. Also, certain ideas and speech can be punished and banned, especially if it speaks out against authority. Your access to to your money can be turned off, and you would be asked to report to some government bureaucracy building for scolding and reinstating access to your money. Corporations will also be able to use the data on your spending habits. Dr. Pippa Malmgreen on a Real Vision show gave a great example of this. Imagine a husband and wife. The husband is in Las Vegas, and his electronic payments show that he is buying a dress for a woman that is a different size than that of his wife. The wife is at home and orders a Ben and Jerry's tub of ice cream through uber eats at night and is watching some self-help, positivity videos late at night. The algo's will be able to deduct that the chance of divorce is high, so banks should consider increasing interest rates to account for this risk. Also if the wife or husband are attempting to look for a new job, the algo's can tell the employer that their mental frame is not in the right place right now so it is best to NOT hire them. So these are very crazy times right now, but my readers know that I have been warning about some sort of event being used to usher in a new system, but more importantly for governments and banks to maintain confidence. They have been saying the economy is strong, and their monetary policies have been working. Central banks are quickly going to become the BUYERS of last resort, and the Fed will get the green light to actively purchase stocks just like the Bank of Japan, the Swiss National Bank, and the European Central Bank (of course many already think this is happening with the Plunge Protection Team, but needs to be officially announced so the people know central banks will prop the markets). So will stocks go up? Put it this way: there will be nowhere to go for real yield other than stocks. When bonds hit 0 or close to 0 and even negative (I am talking about US Treasuries here), it will not make sense to buy bonds for yield. Bonds will not be traded. Pension funds and Fixed Income funds will drastically need to change their approach, and I have argued that many pension funds are indeed in the stock markets, as it is the only place to make real yield. Again, central banks are morphing into the most powerful institutions in human history. They will be buying up everything. This virus allows governments to push for bigger and more powerful governments, as government and central banks will look like saviours coming out of this. Remember, as President Obama's chief of staff Rahm Emmanuel once said, do not let a good crisis go to waste.
OANDA:SPX500USD
by Uncharted-FX
2
BTC- Market structure overview (Long-term perspective!)The long liquidation of nearly 1.2 billion yesterday has cut the OI on Bitmex by nearly half. The bullish structure is broken, but the price managed to stay above the 3k low. Is this the the moment of paradigm shift for Bitcoin? Will the Macro (Fed repo injection) have positive impact on BTC price? How BTC price closes this week will have the tremendous impact on whether the mining remains profitable for most miners and if companies need to sell their BTC in order to keep the operation running. Click the link below for more charts. imgur.com
BITSTAMP:BTCUSD
by Libratus
The yen could not stand it, investors relaxed againYesterday was the day of reckoning for the Japanese yen. We already wrote this week about the failure in the country's economy, but we perceived the lack of reaction of the foreign exchange market as the general inability of the yen to fall due to increased demand for safe-haven assets (see the dynamics of gold prices). As yesterday showed, we were wrong. The markets harbored a strong grudge against the yen, but they lacked reason. After another wave of optimism arose in connection with the improvement of the epidemiological situation and measures to stimulate the economy from China, the yen strongly recalled everything. How deservedly the Japanese currency has suffered is a moot point, but the fact remains that the yen lost a lot yesterday. Although, again, in terms of facts, then 2,000 deaths (+136 new) and 75,000 (+1872 new) cases of infection are no reason for optimism to grow. But the yen was sold, and US stock indexes updated another historic high. What is happening in the financial markets continues to be puzzling, because, looking at the dynamics of gold, there is a feeling that investors are worried about the coronavirus and its consequences, but an analysis of the yen and US stock index charts suggests that the epidemic is a definite plus for the world economies and a reason for purchases even in excess of overbought assets. Meanwhile, inflation in the UK, USA, and Canada was above forecasts. This, by and large, was to be expected: it is impossible to inflate markets with money without consequences for years - sooner or later the time of reckoning will come. It is likely that we have the first signals. Just in case, we note that central banks will be required to respond to rising inflation. They will do this by curtailing the operations of quantitative easing and other cash injections, for example, in the repo market, as well as by raising rates. Rising rates will provoke a chain reaction in the economy and lead to the collapse of bubbles. If 3 years ago, the Fed clearly hoped to gradually blow out a bubble in the US stock market, now it has clearly given up on this hand. That is, the explosion will be very loud. However, so far the markets do not care about this, but now they do not care. I do not care that Apple will fail the first quarter in financial results, that Adida’s economic activity in China has fallen by 85%, that the head of the IMF calls coronavirus the main threat to the global economy, as well as hundreds and thousands of other facts. Going against such a train is generally ungrateful. But to buy Nasdaq above 9700 with such a fundamental background, the hand categorically does not rise. Perhaps the only option to save the rest of common sense in trading and not to merge the deposit is intraday trading with hard stops. So today we will sell oil, USDJPY and EURUSD pairs, buy GBPUSD with small stops, and also look for opportunities for buying gold.
Short
by Trade24Fx
1
USA will cause new World Financial Crisis, again. 1) FED Repo QE 2019/20 (higher than 2008 financial crisis) 2) Nearly 80-120% gain in TSLA & AAPL in 3 months 3) Mysterious Trade Deals/Talks 4) Rising GOOD price since months 5) Lemmings on buy a great fake economy is here 6) Indicators are overheating We really don't see good, yearly economic gain. Soon we will face a new financial crisis, created by USA, possible caused by repo-Market or Jerome Powel. Have fun as long as the party goes on.
SP:SPXShort
by UnknownUnicorn2019403
4
ridethepig | DXY Market Commentary 2019.12.18A timely update to the Dollar chart in time for the NY session, with most of G10 FX trading at the bottom of the short term range markets are preparing for the final flush in USD before killing the year off on the FX board. Lets start by reviewing our long-term map: Here we are tracking the Monthly chart in Dollar from an Elliot Wave perspective; after 15 years of the previous bullish USD cycle we are reaching the end of the road. For those tracking the USD devaluation you will know we are trading the final leg in the 5 wave sequence: On the technical chart the channel support is holding on by a thread: Best of luck all those looking for cheaper entry levels in the Dollar short leg, uncertainty around US growth is not going away. Even if the impeachment expectations fall we should see USD coming under significant pressure. Thanks for keeping the support coming with likes, comments, questions and etc! And as usual jump into the conversations in the comments with your views.
TVC:DXYShort
by ridethepig
"Rally of everything" is doomed: sell Nasdaq100The U.S. stock market has seen a new all-time high. The bubble in the US stock market and the "deal of the decade." We are, of course, talking about sales on the US stock market also - shares of the technology sector (Nasdaq100). The ultra-soft monetary policy, which became the main trend for global central banks after the global financial crisis of 2007-2009, led to price bubbles: stock markets (especially the US and emerging markets), corporate lending (USA and China), bond markets (China and the USA), real estate (EU, China, Canada and the USA), etc. That is, we have a situation that can be called "a rally of everything." When investors buy everything indiscriminately, simply because they have too much money. The ugliest and largest bubble has inflated in the technology sector of the US stock market. In its scale, it has long exceeded the dot-com bubble (and then, recall, Nasdaq lost 80% of its capitalization in just over a year). For example, Apple shares grew by more than 80% (!) over the year, and the company's earnings have remained essentially the same over the years. Even though the company has already squeezed out all the juices from its flagship iPhone (it generates more than 60% of the company's revenue). Why the market has not crashed yet if everything is that bad? We have already answered this question, but we will repeat: the Fed’s refusal to raise rates in 2019 and 3 rate cuts breathed new, but completely artificial life into the rally. Add to this the conclusion of the first phase of a trade agreement between the US and China and get a temporary injection of optimism. Recently, markets have generally switched to artificial life support - meaning a sharp expansion of the Fed's balance sheet due to operations in the REPO market. That is, the patient is already dead. Just waiting for taking off life support. The rally of everything always ends badly for investors. For example Japan in the 80s of the 20th century and the “lost decade”. The sharp increase in gold in recent years proves the fact that growth is at the terminal stage. The simultaneous growth in demand for risky assets (stock market) and safe-haven assets looks very illogical. In general, the number of inconsistencies and various anomalies has long exceeded the critical level. Everything suggests that the end is near. In our opinion, the Fed’s decision to return to the cycle of increasing interest rate will collapse the bubble. The reason for this may be a rise in inflation caused by a sharp expansion of the Fed's balance sheet. Logically, a significant increase in the supply of money will lead to a drop in its value, to inflation. Recall that we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it will begin to adjust. The scale of correction is from 50% and higher. Given that in recent years, shares value of technology companies in the US stock market have grown by 7-8 times (and some issuers have shown growth of 10 or even 20 times), the US stock market will become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
NASDAQ:AAPLShort
by Trade24Fx
Impeachment Trump - a time bomb for the US stock marketIn our previous reviews, we have repeatedly spoken about the bubble that swelled in the US stock market and that the sale of shares of American companies or the stock market as a whole is a unique trading opportunity that happens 1-2 times in trading life. Accordingly, to miss such an opportunity is simply a crime against trading. There are more and more signs of impending collapse (see our previous reviews). The stock market has not fallen yet, because the Fed is taking completely desperate steps to keep it afloat (referring to the sharp inflation of the Fed's balance sheet due to operations in the repo market of up to $ 500 billion this is an injection of money into the US financial market). The scale of cash injections is horrifying - the Fed is serious about increasing its balance by 10% soon. This cannot go on for long. We will talk about the consequences of such a policy in our next review. Today we will focus on the main event of the current week, the consequences of which can affect for years. We are talking about the impeachment of Trump and a successful vote on this issue in the US House of Representatives. We want to note that there will be no immediate effect since this whole procedure does not aim to remove Trump from the post of President, but rather is an act to discredit Trump and the Republicans as a whole. The majority in the Senate are Republicans. Not a single Republican voted for, the Senate will fail to vote. That is, in terms of the current Presidency, Trump is not in danger. But the damage to his image and the image of the Republican Party, which he represents, will be colossal. That is, the chances of the Democrats winning the US Presidential election are sharply increasing. For the US stock market, this could be the verdict and the end of the bull market era. Recall, the US stock market owes much to its growth to Trump and his policy, starting from lowering corporate income tax (from 34% to 21%, which led to a sharp increase in company buyback programs and provoked an increase in demand in the US stock market) ending with upholding the interests of US producers (trade wars were unleashed for this purpose). And in general, the Republican agenda is to protect big business, which plays into the hands of the stock market. The advent of the Democrats means a sharp turn in public policy, which will lead to the disappearance of favourable conditions for the US stock market. Against the backdrop of an overbought market, this will be enough for a reversing and the start of sales. Thus, the impeachment of Trump is a kind of time bomb laid under the US stock market. According to Stanley Druckenmiller, one of the most successful American investors, “a change of leadership in the White House will mean the advent of anti-capitalists. Which will trigger the transition of the US stock market to the bearish phase. ” Recall that we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it will begin to adjust. The scope of the correction ( rather the bearish phase of the market) is from 50% and above. Given that in recent years, shares of technology companies in the US stock market have grown by an average of 7-8 times (and some issuers have shown growth of 10 or even 20 times), the US stock market will become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
TVC:NDQShort
by Trade24Fx
4
Last week results & immediate plansThe markets finally went out of “hibernation” so we could observe fluctuation not by 40-50 pips, but by 100+ (well, or 400, as is the case with the pound on Friday). Last week began with Trump's tweet about the successful completion of the first phase of negotiations with China. Recall, on December 15, the United States threatened to introduce additional tariffs on goods from China in the amount of $ 160 billion, which kept the markets in suspense. According to Fox Business, Washington and Beijing completed the "first phase" of the trade transaction, but its terms may not be publicized at all. Formally, this is an occasion for optimism and the start of sales in safe-haven assets. Nevertheless, we consider the current equilibrium to be extremely fragile and continue to look for points to buy yen and gold on the intraday basis. Then there was a meeting of the Fed, which showed that the US Central Bank is serious about holding a pause in monetary policy - everything suits US Central Bank in the current state of affairs in the economy. But at the same time, the Fed will continue to flood financial markets with money through the Repo system. The Fed’s balance sheet reduction was replaced by a sharp expansion: according to the Fed, it plans to infuse $ 500 billion. If this happens, then by mid-January the Fed’s balance will increase its balance by 10% in just a month. As a result, the balance will exceed $ 4.5 trillion and reach new record levels. Honestly speaking, instead of gradually removing this money from the system, the Fed continues to increase its amount. In the end, it will end badly. For the dollar, this, in our opinion, is a kind of sentence. Classic demand-supply chart: with a sharp increase in supply, the price should decline. So this week and for the foreseeable future, we will sell the dollar across the entire spectrum of the foreign exchange market. The first ECB meeting chaired by Christine Lagarde ended with nothing - the monetary policy parameters did not change. But the new head of the ECB made it clear that it was time for the Central Bank to change its strategy of action and promised to present its vision by the beginning of 2020. The main event of the week was the victory of the conservatives in the parliamentary elections in the UK. Many have already called this a kind of second Brexit referendum since voting for Johnson is a vote for his plan to leave the EU by January 31st. The pound on this occasion rose sharply on Friday, reaching 1.35. After that, we perceive some correction as an excellent chance for its cheaper purchases. Indeed, by and large 1.35 - this is not the limit of growth and the pound could well grow to the area of 1.40 and even higher. As for the interesting perspective positions USDRUB purchasing (this will become a kind of hedge for other positions on the sale of the dollar against the euro, pound, Japanese yen and other base currencies). In general, the week ahead is quite eventful: the announcement of the results of the Banks of England and Japan, GDP of the USA and Great Britain and so on. This means that it makes sense to start trading after a rather long period of hibernation in the foreign exchange market.
Long
by Trade24Fx
BIG DROP Potential in the coming weeks!I believe stock markets will push to ALL time highs, and squash gold in the process. Ever since the REPO operations started the yield curves started to steepen. The bond market was sending a strong signal something is wrong, and somehow they were able to reverse the trend. So far, I see a massive push to raise the yields, and it keeps working. Naturally as bond yields go up, golds will continue downward. There is a long way down.. Bond prices will fall, yields will go up and gold/silver will go down.. In Mid Dec the FED will probably not cut again, and the big breakdown will occur. I think that will be the time to buy, or shortly after. The US-China tradewar seems to influence gold, however in reality, it seems to be fake. We had a huge breakdown because of supposed agreement, which Trump then said wasn't true. There was no reversal, but further losses. I am looking at USD value and Bond Yields for gold value at this point, both of which are pressuring it down. What do you think? Post your ideas in the comments.
OANDA:XAUUSDShort
by otterslide
Repo Madness Continues!www.newyorkfed.org Repo has been the talk of the town lately, and the Federal Reserve has so far downplayed the issue at hand. Fed chair Jerome Powell did mention this problem in his last FOMC press conference, but again told journalists and viewers that this is not quantitative easing (QE). Repo and QE both inject money into the system. he difference is really new money vs old money. In QE, the central bank purchases bonds as a way to inject money into the system as this purchase sends money to the primary dealers (banks). This is done to keep interest rates low. Bonds and yield have an inverse relationship: when bonds go up, the yield drops and vice versa. With QE you can get to a very crazy environment (one that economic students in post secondary for the last 10 years know nothing about as it was not part of the curriculum) which is negative interest rates. This is what we see in Japan, Europe and Switzerland. Basically the central banks in those countries have killed their debt markets. The central bank is the only one buying bonds at the auctions because no one in the right mind would buy an investment knowing they will collect less money than they invested when the bond matures. Now a days bonds are being traded because you can find a bigger fool who will buy them. I have outlined this as the problem with real estate and stock markets around the world rising as there is nowhere to go for yield now. Central banks have forced money away from bonds to chase yield to those aforementioned markets. The second way to inject money into the system is through repo. Banks have to keep reserves with the central bank. Generally when transactions are done, the reserves held in the central bank changes. For example Bob banks with Bank A and buys a coffee from Jen who banks with Bank B. When the transaction is through what really happens is that Bank A’s reserves with the central bank is credited (reduced) and Bank B’s reserves are debited (increased). This happens on a daily basis at a time when all balance of payments are settled. Of course if both bank with the same bank, then nothing changes, the mechanism still works the same way. When banks need to borrow money for the short term, they can borrow from the reserves of other banks at the Fed Funds rate (for the US). When other banks do not have much reserves left over, repo is needed to inject more money to keep the interest rates low. Interest rates are really the price of money. If there is a lot of money and banks can lend due to the environment, then interest rates can be low. If you get into a period of time when nobody wants to lend money because of big risks, uncertainty etc and there is not much cash being floated into the system (people want to hoard money) then the price of money (interest rate) has to go up in order to entice people and banks to part with the money. So when interest rates spiked up to 10% in the US, it was because there was no money left in the reserves. A really scary situation. When the Federal Reserve injects money through repo, they take collateral from the banks. The Fed says this collateral is US treasuries from the banks. However, I would not be surprised if toxic assets are being passed to the Fed so the banks do not have to take a loss on something they know will lose. In this way the difference between QE and repo is new bonds (bought up at auction) vs old bonds (collateral that the banks already have and is exchanged). Both operations inject money into the system. If you follow my work, I have outlined why this operation will not be named QE because it would illicit a confidence crisis. QE was supposed to be a one time desperate policy initiated by the central banks to prevent another 1920-30’s type depression. There was so much bad debt in the system that it could not be allowed to fail. Forward to today and there is more debt now. The real economy has not really improved. Financial engineering by keeping interest rates low, have made people go into debt to buy things they really can’t afford. Economic growth is not based on real fundamentals. If QE is brought up again, then people will realize that QE actually did now work. Central banks were wrong, their monetary policy did not work. Once people understand this, the realization will be that we are stuck in a QE and 0% interest rate environment forever. Central banks had no plans to raise interest rates and get off of QE. We are now in a managed economy and central banks will morph into the BUYERS of last resort as they cannot allow things to fall. Not only will they have to buy bonds to keep interest rates low, they may need to buy other assets just to keep the system propped. We are already seeing the Bank of Japan and Swiss National Bank buying stocks and ETF’s. In other words, central bank balance sheets are expanding. New York Fed Senior Vice President Lorie Logan posted an article titled “Money Market Developments: Views From the Desk”. It was quite something. So when repo began, the Fed said they were promising an average about 45 billion dollars a day to provide liquidity to the banks. They said it was only temporary, but then this number turned to 120 billion a day, with the program being extended from October 24th, until next year. This article indicated that the average repo daily is now 190 BILLION per day. Take a look at the chart (figure 3) at the top of this post and you can see it is pretty close to this average. This is possible because the US Dollar is the reserve currency so there is an artificial demand for it meaning the US can print as much as they want and do not have to care about deficits…this is why China and Russia are attacking US Dollar demand. Both Europe and Japan can do this type of monetary policy too because they export a lot of goods meaning other nations buy Euro’s and Yen for trade…creating demand for those currencies which warrants printing. To put this number into perspective, the stock market cap for Goldman Sachs is 79 billion, for JP Morgan it is 407.7 billion and for Wells Fargo it is 228.3 billion. Once again, I have mentioned how this will be indefinite. It seems like something has broken and the Fed may be losing control of the system. They will throw as much money as they have to in order to keep this propped up. Balance sheets are expanding. They have pretty much erased all the progress from Quantitative Tightening for 3-4 years in less than 3 months with this repo madness. Central banks are stuck, and it is all about maintaining confidence in the system. They have to appear as if they know what they are doing and everything is okay. At this blog, I have been warning about this confidence crisis. I believe we are very close. Right now the market believes the Fed. The Fed is making it appear as if they are pausing on their interest rate cuts. However, I believe they will cut in December/January. Once this cut happens, people will begin to realize the game. Also, the Fed is running out of excuses. They have to maintain this cutting rates in a strong economy narrative by using geopolitical factors. In the end they are cutting rates mainly for three reasons 1) they know a recession is coming, 2) as a way for government and the public to service their debt loads which are increasing, and 3) perhaps the most important, to attempt to weaken the US Dollar (although I have outlined through my work why the Dollar will likely go higher and how this is what will cause problems for the Fed…perhaps lead to another Plaza accord type deal). The problems in the world get worse as the US Dollar gets stronger. So again everyone, not a dull time to be alive. Repo madness continues and it shows no sign of stopping.
COINBASE:BTCUSD
by Uncharted-FX
REPOCALYPSE NOW!This is serious. Find out what 'REPOCALYPSE' is about. Protect your positions very carefully. Get real - I don't know when it's happening nor does anybody else. REPOCALYPSE is not just doom-saying stuff, though it might appear sensationalist. This is reality mates. Those who keep there heads in the sand and do not take protective actions will be flushed out. DISCLAIMER: All statements here are over-simplifications of very complex issues, and are speculative opinion. This is not constructed as advice for making decisions about trading in securities. Your losses are your own. Declaration : This post is consistent with Tradingview's house rules on text-based analyses.
FOREXCOM:US30Education
by Captain_Walker
A perennial problem of the dollar and profit-taking tradingThe US dollar continues to demonstrate the resistance. It does not decrease after the Fed cuts, it ignores macroeconomic statistics, it grows amid a political scandal and a possible impeachment of Trump. The US dollar as the main asset-refuge, the growth of the dollar is a consequence of the weakness of other currencies, etc.). But why? Obviously, with time the stock of negativity will accumulate. That is why we continue to recommend the dollar sale in the foreign exchange market. We are sure that all this is compensated by a large movement, which ultimately cannot be avoided. As for yesterday, we note that our expectations regarding the data on US GDP for the second quarter were fully fulfilled (they came out within the forecast of 2%). The bears failed to seize the initiative. We also note yesterday's US trade balance data, which showed a deficit of $ 72.8 billion. This is a lot. Yes, while the markets are trying not to see that, but once again we note that sooner or later the US debt will be remembered both by the giant US debt (soon it will be $ 23 trillion), and the constant budget deficit (already exceeded a trillion) and the trade deficit (year on year) striving for a trillion) and so on. In the meantime, the main attention of the markets is focused on what is happening in the repo market. The Fed continues to flood the market with money. Injection volumes have already reached $ 100 billion per day (before that it was about $ 75 billion). Against this background, the growth of the dollar seems even more abnormal. Friday in terms of macroeconomic statistics will be relatively calm. Considering that several assets showed good growth over the week, Friday could well be a day of profit-taking, because it will be the end of the month. In this light, our recommendations for today are as follows: buy gold, sell the dollar, buy the pound and the euro, also, today you can try to buy oil. Do not forget to put hard stops in open positions.
Long
by Trade24Fx
Repo-injections in the USA, Brexit optimism and other resultsWe have already written about the results and the Fed’s decisions, the Bank of Japan, Switzerland and England in a previous review. We only note that mood is “dovish”, which creates a favourable background for the gold growth, therefore, we continue to buy the asset this week. As for the USA repo market. A shortage of liquidity in the money market provoked the Federal Reserve Bank of New York for the first time in 10 years to resort to liquidity injections. We are talking about tens of billions of dollars a day. So far the dollar on the foreign exchange market reacted calmly, the problem may well be aggravated. Too large volumes of US government bonds are pumping dollars out of the US money market, which stimulating dollar infusion by the Fed. Whether it turns on the money machine at full capacity or a new round of quantitative easing is not clear yet, but for the dollar, it is an alarming signal. Our position on the dollar is also unchanged so far - we are looking for points for its sales. First of all, against the Japanese yen and the British pound. The last 3 weeks have been extremely successful for the British pound. Its growth against the dollar, counting from the beginning of September, reached 600 points. The last time such an impressive rally was observed at the end of 2018. Brexit is the reason for all the troubles and joys. This time, a series of defeats of Boris Johnson in Parliament led to the fact that the markets believed that there would be no withdrawal without a deal. This in turn sharply increased the chances of successful negotiations with the EU. This is also supported by European Commission President Jean-Claude Juncker comments that the Brexit deal could be concluded before October 31. But not everything is decided, this week is likely to give the pound several reasons for volatility. We are talking about unresolved problems with the Irish border, as well as the decision of the Supreme Court of Great Britain regarding the legality of the suspension of Parliament. Our position on the pound is still unchanged - we will look for points for purchases of the British currency. But we will do this from relatively conservative points. Friday showed that the pound can not only grow but also fall. Last week was extremely busy for the oil market. The drone attack on the oil infrastructure of Saudi Arabia not only led to a 50% drop in oil production but also triggered a panic in the oil market. The result is the one-day oil growth record in history (an increase of about 15%). However, the very next day, Saudi officials assured that by the end of September production volumes would be restored. Even though now some imbalance has arisen in the oil market, given its temporary nature, we recommend oil sales. Comments from Arabia on the restoration of production ahead of schedule is likely to return oil to the level at the start of last week. And this means that 5% is the potential oil decline.
by Trade24Fx
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