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Fed’s Anti Aircraft Fire No Match for Treasury Bombing

Shallow Thoughts

The US Treasury will bomb the markets with $288 billion in new supply over the next 7 days. The Fed’s outright purchases of Treasuries and MBS from Primary Dealers are running at a weekly pace of $460 billion.

It’s mind boggling. Not only is the Fed buying all new Treasury supply through its strawmen the Primary Dealers, it’s paying them an extra $172 billion to do with as they wish.

Liquidity moves markets!

Follow the money. Find the profits! 

The Fed is hoping that the dealers will use it to stand up like big boys and make markets like they’re supposed to.

It’s not working. Stocks got clobbered yesterday, and it’s worse in the futures this morning. The crash simply refuses to abate.

The Fed and the Justice Department gave the financial criminal class a free pass in 2008-09 and thereafter. It then rewarded them with 11 more years of free money, as much as the wanted. The Fed promoted moral hazard to the sky and beyond. It got an asset bubble that grew so big and so brittle, there’s now NO WAY OUT.

What does the Fed do? It doubles down on its mistakes again and again and again. Who will be left holding the bag? All of us.

Ben Bernanke was the evil mastermind of this monster. Yellen tried to walk it back with her normalization scheme, but it was doomed from the start. Bernanke had laid the trap. He knew that the monstrous credit bubble he created and promoted could never be reversed.

Bernanke should hang by his balls. 

Today’s trading setup is below. Follow my Deeper Thoughts, with tips on how to preserve, protect, and defend your investment and trading capital, at Liquidity Trader.

Market Trading Setup for Wednesday, April, 2020

Yesterday’s post.

Hourly ES S&P 500 Futures Chart

Another catastrophic selloff is under way in the S&P futures. As of 8:10 AM in New York, they are sliding relentlessly, down 96 points at 2477. They are back below the crash trendline that came off the market top in early March. That trendline is at roughly 2552 as of 8 AM.  It will be at 2545 at 4PM.

The next minor support level is at 2454. The next likely support below that is 2400-2385.

The only bullish straw is that a 5 day cycle projection of 2472 has been hit. If they can climb back above what is now resistance at 2492, the worst case can be avoided. Only if they clear 2510 should we expect a decent rally.

Hourly oscillators are still on sell signals, but at least downside momentum is waning.

ES Futures Hourly Chart

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

The daily chart gives a broader perspective. Overnight and pre market trading has ranged from 2547 to 2467. That puts the ES back in the crash channel dating from February 20. It also decisively broke the rally channel off the March 23 low.

The false breakout through the crash channel is a bad omen. Such occurrences are usually strong sell signals.

The rally failed exactly at the 38.2% fiber nacho ratio. The pullback is now holding at the 23.6. 2455-60 is support. The next support level would be 2386 if that breaks.

The ES would need to clear 2560 to cleanly break out of the crash channel.

Rate of Change and MACD tuned to an 8 week cycle frequency are mixed. The MACD is still bullish but losing momentum. At this frequency and with shortened up phases, this indicator is liable to lag a downturn. RoC should be more timely. It’s in a holding pattern in deeply negative territory. Both the pattern and the absolute level matter. A downturn from this level would signal resumption of the crash. 

ES Futures Chart

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.

S&P Cash Index Hourly Chart 

The red bar at the far right shows where the futures traded overnight. It’s between suggested support at 2467 and resistance at 2547.

There are no clear trend channels defining the current action on this chart. If this support level breaks, the next target is anybody’s guess. Mine is 2400. 2365 and 2340 would be more critical. If they were to break the market would quickly target 2200.

On the other hand, if any of those higher levels hold, the pattern could turn constructive if the market clears 2550.

The downturn in the 5 day cycle oscillator came from a horrendous negative divergence. That is a powerful sell signal.

S&P 500 Hourly Chart

Join me on the 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, April 1, 2020.” 

From coronavirus locked-in 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. 

Gold’s Selloff That Wasn’t

When the margin man came collecting on other stuff, gold got dumped. Once he left, gold came right back. What does it mean for the long haul?

Plus a few mining picks with low risk entries and good upside potential.

Subscribers, click here to download report.

Try Lee Adler’s Gold Trader risk free for 90 days!  


The Charge of the Light Brigade

The Fed injected around $600 billion into the markets and the banking system last week. That’s about $2,000 for every American, and it was just one weekly installment. All in the valley of Death rode the 600. We are the 600 and the Fed is leading us into the valley of Death.

Meanwhile banking indicators suggest that the sickness is getting worse, not better.

Subscribers, click here to download the report

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Was That A 4 Year Cycle Low?

Massive Fed intervention turned the market, although cyclicality was favorable. The 6 month cycle low was overdue. But is it something more than that?

Technical Trader subscribers, click here to download the report.

Not a subscriber? Try Lee Adler’s Technical Trader risk free for 90 days!  


Fed Hyperinflates Its Balance Sheet But It’s Only A Holding Action

On March 3, the Fed converted Not QE into Panic QE. Since then it has pumped $766 billion in cash into Primary Dealer accounts. At the same time the US Treasury issued “only” $147 billion in new debt. So in essence, the Fed issued $619 billion in excess cash.

Other than the hyperinflationary implications, what good has it done? What does it mean for us looking ahead.

Subscribers, click here to download the report

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Not a subscriber? Try Lee Adler’s Technical Trader risk free for 90 days!  


Already Soaring Federal Outlays are About to Explode and Boy Is That A Problem

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!

Try Lee Adler's Technical Trader risk free for 90 days! Follow the money. Find the profits!

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, 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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