Recent panic capital flows into the US have increased liquidity, distorting the Treasury market, which has pulled funds out of equities, sending stock prices lower in the process. If the flow of deposits into the US slows, that could cause a condition where liquidity is insufficient to support the Treasury market, and both markets could weaken simultaneously, as opposed to the current condition where one rises at the other’s expense.
There have been indications in the past two weeks that those inflows have begun to slow, and we saw the results of that expressed as a return to falling stock prices last week. Any further decline in these liquidity measures should result in even greater declines for stocks and should begin to reverse the rally in the Treasury market. The question may be what the Fed will do to prevent that from happening. Doing the Twist is not the answer. We’ll have to see if Ben has another rabbit up his sleeve.
Click here to download complete report in pdf format (Professional Edition Subscribers). including 76 pages of charts and clear, cutting edge analysis that you can use to gain an edge in the market. Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. 30 day risk free trial for new subscribers. Click here for more information.
Stay up to date with the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, along with regular updates of the US housing market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Try it risk free for 30 days. Don’t miss another day. Get the research and analysis you need to understand these critical forces. Be prepared. Stay ahead of the herd. Click this link and begin your risk free trial NOW!
Enter your email address in the form to receive email notification when Professional Edition reports are posted.