New York prices are gapping and reversing daily. It’s madness if you don’t stay up all night trading the fucutures.
9 days ago I told Lindsay Williams that there were dead bodies in the market that hadn’t floated to the surface yet. I said we don’t know who they are, but they’re dead, and they’ve taken their bankers with them. And I said the Fed would have to fill the grave, or some other stupid analogy. I was at a loss for analogies that day.
Although the dead have yet to be identified, the proof is now out there. On top of the trillion a week in term repo offerings, the Fed announced yesterday that it would offer another trillion in daily overnight repo. It also dusted off and restarted a couple of old Great Financial Crisis programs– the PDCF, Primary Dealer Credit Facility and a direct Commercial Paper program for smaller industrial companies.
If that was the Great Financial Crisis, then this is the GREATEST. It’s the Muhammed Ali of financial crises.
Dead bodies have floated to the surface. And some of them are Primary Dealers. My guess is that all of them are dead, because all of them use most of the 90% or more leverage available to them. Their equity has been destroyed 3 times over. There’s no more cash and no more capital.
The Fed reopened the PDCF because the dealers need Payday signature loans. They have no collateral for repo. Proof is that they took only $140 billion of yesterday’s first repo auction of $500 billion. And in the afternoon operation, the dealers took only $10 billion of the $500 billion offered.
The collateral is all pledged and repledged. They now need to borrow on the mere promise to repay.
Which they can’t.
We’re screwed.
Market Trading Setup for Wednesday, March 18, 2020
Hourly ES S&P 500 Futures Chart
The futures are limit down again. They’re trading down 92 points at 2393. We are looking at an opening that could be double that loss or more, which would break the lows and carry SPX cash to 2300 or worse. The 5 day cycle projection isn’t firm yet, but it could plausibly be from 2250 to 2200.
Momentum and cycle indicators are only heading weakly lower, but that should change, most likely for the worse, when NY opens.
Reminder- I’m only talking patterns for a day here. This is not the big picture. If you want that story, you must subscribe. Risk free trial and all.
S&P Futures Daily Chart
You can see how dire the situation is on the daily chart. The ES is trading on the centerline of the sharpest crash channel. The lower line and a likely target today is around 2250.
2300 is also obvious support. I’d be surprised if that holds. There should be a bounce to at least the top of the crash channel at 2500 if it does.
This is still grossly bearish until these channels are broken. The cycle and momentum indicators are in truly hideous shape. There needs to be a positive divergence before a decent rally takes shape. It means that this decline won’t be done until these indicators make higher lows.
Again, this is for the perspective of one day only. The purpose of these reports is not to divine the longer term. If you want longer horizons, join me at Liquidity Trader.
Department of Wash, Rinse Repeat – There’s no oversold parameter in a crash. Positive divergences are almost certainly necessary to form a good swing low. There are no positive divergences on the daily chart yet.
S&P Cash Index Hourly Chart
The New York open is much better than I anticipated. The PPT (Plunge Protection Team) has come to the rescue apparently. Or maybe not. Not everything is open yet.
The red bar at the far right shows where the futures have been trading. The range was artificially limited by the fact that the market has been limit down for several hours.
2350 looked like a likely opening level, as I wrote a few minutes before the open. But they’re hanging around 2400. We’ll see about that.
The 5 day cycle projection looks like 2125. At 9:39 AM the chart I use for that has frozen. Ideally that low is due any time from late today through Friday. While we are hardly operating under the ideal circumstances, just be on the lookout for a vicious turn once some kind of bottom pattern has formed.
Join me on the Capitalstool.com message board today and I will update you there occasionally during the day. Feel free to join the “fun.”
“And that’s the way it is, Wednesday, March 18, 2020.”
From Zagreb, Croatia, good morning!
Where have you gone Walter Cronkite? Our nation turns its lonely eyes to you.
Meanwhile, here are the latest reports from Liquidity Trader.
Even before COVID-19 the trend was clear that the Treasury would need to keep borrowing money hand over fist. Now the deficit will explode. This is a hideous problem for financial markets in this condition.
Subscribers, click here to download the report.
Get this report and access to past reports. Read Lee Adler’s Liquidity Trader risk free for 90 days!
Last week’s indications that gold was going higher failed miserably. A collapsing credit bubble takes no prisoners. When the margin man comes to your door, you sell whatever you can. Gold was sold. It was no insurance policy. There was significant technical damage. We look at where gold and the mining stocks are headed next.
Subscribers, click here to download report.
Try Lee Adler’s Gold and Mining Stock Trader risk free for 90 days!
The SPX has broken out of its original crash channel to the downside. It’s in a new channel with a slope of -46 points per day. Long term signals are already extremely negative, and are on the verge of turning catastrophic, cataclysmic, and apocalyptic.
I’ve run out of adjectives.
Technical Trader subscribers, click here to download the report.
Not a subscriber? Try Lee Adler’s Technical Trader risk free for 90 days!
With no prior announcement or clue, the Fed bought $37 billion in Treasury coupons from Primary Dealers on Friday. To pay for them it deposited $37 billion into dealer accounts at the Fed.
It was the largest single day POMO (Permanent Open Market Operation) purchase since the days of TARP and QE 1 in 2009.
It came without warning. I was so glued to the intraday live charts on Friday, I wasn’t even aware that the Fed had taken this emergency action until after the close.
We sure as hell saw the result. But this is only the beginning of this story.
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And now, a note from the church rector:
Good Morning!
Twitter has banned me for using bad words (moi? 😱) 😄. I had tweeted an emotional criticism of a so-called financial news outlet of Newscorp/Dow Jones.
Banning me for throwing a few cuss words at Rupert Murdoch’s propaganda minions is like banning David for slinging a rock at Goliath. Only I didn’t kill anybody. Besides, they’re impervious to rocks or reason.
But alas, Twitter’s playground monitors stomped their feet and pouted, “Take it back, or we won’t let you play!”
But they also said that, instead of taking it back, I could formally appeal.
I’ll never retract the truth, so I took the second option. My appeal went like this, in the immortal words so often heard from a street kid from Philly: “Stick it up your ass!”
Good bye Twitter. I never believed in you anyway.
So if you like this post or anything else you see on Wall Street Examiner, please give it a link on your favorite financial social media site, with my thanks! And please join us at our own little social media playground, Capitalstool.com for my occasional intraday blurtouts. You can add your very own blurts too. – Lee
