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Apparently there’s a widespread belief on the Street that the Fed is at the top of its “rate cycle.” I don’t know if it is or not, and I don’t care. Rate setting is an irrelevant exercise for the market. The Fed sets its target rate based on money rates in the market. They have stabilized for the time being, god only knows why. Maybe the trillion in cash that’s still sitting in the Fed’s RRP slush fund as T-bill supply moderates slightly has something to do with it. If it is based on the expectation of a material reduction in T-bill supply, it’s wrong.
Again, I don’t know and I don’t care. I can guess that some time next year, the money in the RRP slush fund will be all but gone, and the sheet will really hit the fan then. We’re not there yet. There’s still a trill left in that fund.
What I care about is the quantity of money. And they are still shrinking that with QT, the shrinking of the Fed’s BS, aka balance sheet. Until the money supply expands, which will at the least require the Fed to end QE, and most likely restore QE, stock and bond prices can’t trend higher together for long.
In fact, one or the other or both, must trend lower for as long as money supply is flat, and at the same time, the US government is continually issuing more paper to absorb the scarce supply of money. With supply constantly growing, and demand constrained by the lack of money, prices of stocks and bonds must trend lower. Unless the economic Law of Supply has been repealed. Fuggedaboutit! Treasury Supply Ain’t Going Away
That’s over the longer run. Things can change. Policy can change. The flow of supply could change, in theory, but it won’t until the politicians decide to raise enough revenue to pay for the government services that the majority have decided they want. In the US, that’s not in the cards. As for cutting spending, any such cuts that could make it through the political process would be immaterial to the size of the defecate. Defecate spending will continue for as long as the market allows it at a cost that the government can still absorb. Defecate spending means an endless supply of TP hitting the market.
All of these inputs can change, but we don’t know when, and we don’t know which market will respond to what, and how. That’s why we do technical analysis on the price charts. Not Just a One Week Wonder
That doesn’t give us all the answers either. Sometimes the charts are hard to interpret. Most of the time, actually. So we often misread and reach the wrong conclusion. Sometimes, the patterns are misleading. The dealers and big pools that make markets do it on purpose to fool the chart readers. That’s Wall Street. It wants your money, and it will take it from you by any means that it can. There are no rules that can’t be changed.
It’s a tough game. We must be in it to win it. We only need a slight statistical edge. Then take the losses and move on to the next trade. It only takes picking a few big wieners to come out a head.
The moral of the story is that to be a winner, reach for the big wieners. Cut losses and keep reaching. Forget rates. Forget news. Play the patterns even if the edge is just a couple of percent. Accept that our guesses will be wrong a lot of of the time and move on.
Today is a tough read on the hourly chart of the ES 24 hour S&P futures. More often than not, quiet, tiny ranges occur at intermediate tops. But this one keeps making higher highs and higher lows. It looks like accumulation. It tests my agnosticism and makes me lean with it. So I’m still leaning long in my own day trading port for sporting and gaming purposes.
The hourly chart of the ES is wedging out. It’s a rising wedge, which sometimes break down, but sometimes break out to the upside. I’m seeing a 2-3 day cycle projection of 4415 here, so my bet would be on an upside breakout. On the other hand, there’s a ton of resistance 4395-4400, and the original base breakout measured to 4395. So I don’t know. The market will have to prove it. I’ve placed my bet.
My downside failsafe level is 4374. Break that, and the bet is off. I might nibble on the short side if they break that.
But if they materially clear 4406 this afternoon, the grind of the past 5 days may only be the halfway mark of this move.
For long term investing, I buy and hold well located residential real estate with no leverage. Stocks, not so much. Residential real estate has value. Stocks are like crypto. If they don’t have a dividend, then their intrinsic “value” is zero, absent the stock market where buyers and sellers agree on prices, for imaginary reasons.
The only value of a stock is its price. Everything else that investors think and say about a stock is bullshit, unless you are Warren Buffet and can buy the company and grab some of the profit stream. As an individual shareholder, you own nothing. You have no rights of ownership. All you have is a wet dream that you will some day be able to sell the stock for more than you paid for it. What’s the difference between that and dogecoin?
Bonds on the other hand have a real value, particularly US Treasuries. The momentary value of a 10 year Treasury note is currently 4.56% The uptrend is still in place. Since we can get more than that from a 13 week T-bill and since supply isn’t going away anytime soon, I have no interest in locking in 4.56% for 10 years, sorry. Fuggedaboutit! Treasury Supply Ain’t Going Away
As for the yellow relic, it feels like another nightmare, but this is a dream setup. Gold Bullish Pullback But Miners Are Doubtful
For moron the markets, see:
- Gold Bullish Pullback But Miners Are Doubtful November 8, 2023
- Swing Trade Screen Picks – More Longs November 7, 2023
- Not Just a One Week Wonder November 6, 2023
- Fuggedaboutit! Treasury Supply Ain’t Going Away November 5, 2023
- Which to Believe, the BLS or Actual Tax Collections November 3, 2023
- Here’s Why Macro Liquidity Still Signals Record Danger October 28, 2023
- Dealers Pull In Their Horns October 14, 2023
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