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Macroliquidity and Sentiment Reach Crucial Juncture

Macroliquidity edged to a new high in the past week as the Fed held its regular monthly MBS settlements March 14-22. The markets must now fend without the Fed’s help again until mid April. But they have plenty of liquidity coming from the BoJ and especially the ECB as NIRP drives capital out of Europe and Japan into the US. US bank loan growth also contributes to deposit growth which means increasing liquidity available for the market.

The problem is that sentiment has undergone a slow shift toward greater skepticism of central banks to keep bull markets going, and therefore toward a more cautious and even negative stance on both stocks and bonds.

So far, in spite of the recent rally there’s no sign of a swing back toward the positive. The current upswing is now near the trend limit that marked the last two market peaks. This is an important test of whether the trend toward greater caution is becoming something greater than an intermediate term phenomenon. Is it part of a major cyclical shift, or even a secular shift? Another market downturn from here would lean toward at least the former if not the latter.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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