Over the past 3 days, the hourly chart of the ES, S&P 500 24 hour futures has become increasingly disjointed and incoherent. This is a symptom of the growing shortage of liquidity. It reflects the inability of dealers and other big players to maintain narrow spreads. The market has no depth because the cash isn’t there. It’s all in the Fed’s RRP fund for MMFs, where money that came out of redeemed T-bills goes to hibernate. That fund, which is essentially a Fed money market fund for money market funds with nowhere else to go, eclipsed the $2 trillion benchmark yesterday for the first time, thanks in large measure to the US Treasury’s ongoing campaign of paying down T-bills.
The scary part is that money managers either can’t use that cash for anything else because they’re money market funds, or else they don’t want to deploy it elsewhere. Sensible people. As long as that Fed RRP fund keeps growing, or even just stays level, it’s bad news for stocks and bonds.
I get into that in detail, with lots of charts and explanation in the Liquidity Trader Money Trends reports . It will leave you with no doubt about where all this is headed as time and policy moves progress toward the ultimate climax and denouement of decades of monetary policy mismanagement, malfeasance, and immorality.
Meanwhile, back at the hourly sit you a shun as of 5:30 AM in New York, we have this mess. Particularly for the past 2 days. But keep one thing at the forefront. For those two days, a pattern of higher lows and higher highs is and will be intact unless and until the ES breaks 3913.50. All hell should break loose if that comes to pass.
Even a rebound from here won’t be all that bullish unless they can take out yesterday’s high. We’re looking at what has so far been a pathetically weak 5 day cycle up phase. Unless it shows more upside momentum today, this goose is cooked.
- Even Steven in This Week’s Swing Trade Screens May 23, 2022
- Stocks Are Ahead of the Curve May 23, 2022
- Market Indicators Show Crash Risk Remains Intact May 22, 2022
- Gold Miners Make Short Term Bottom, But Wait, There’s More! May 17, 2022
- Buys Beat Shorts Again in This Week’s Swing Trade Screens May 16, 2022
- Dealer Positions Show It’s Not Getting Better and It Should Get Worse May 15, 2022
If you’re serious about the underlying forces of supply and demand that drive the markets, join me!
If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.
