I don’t know about you, or the market, but I’m going back to work. Hope you had a great week, and I wish you the best for the new year. I had a nice week off running a bathroom renovation over the holidays. Ha ha.
But here we are, and I’ll start off with this thought.
Macro Liquidity – The Party’s Over
The market has reached maximum extension versus the Composite Liquidity Indicator. The indicator remains flat despite surging bank deposits. Investors and dealers appear to be pulling cash from money market funds to buy stocks and bonds. That’s bulking up bank deposits, in a bullish self feedback loop. Non-subscribers, click here for access.
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But that only can go so far as the Fed continues to work to blunt that via QT. QT or Quantitative Tightening is the act of the Fed shrinking its balance sheet, which in turn destroys bank deposits. Foreign central banks have also been uncooperative in supporting the bull moves in US stocks and bonds. That reduces systemic liquidity. Non-subscribers, click here for access.
In recent months animal spirits have resulted in enough private credit creation to outstrip the Fed. The US Treasury has goosed the process by stopping the issuance of more T-bills than are expiring. With a reduced supply of T-bills, investors have had more cash to play with, and play, they did. But all that will come to an end over January and February. There are already hints from these liquidity measures that a market top may be at hand. Non-subscribers, click here for access.
KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality!
Interesting concept, huh?
Meanwhile, the ES 24 hour S&P futures are still vacillating after Friday’s little pullback. Yourapeeins are waiting for their Merkan counterparts to wake up and lead the way.
Meanwhile there’s something unfamiliar on the chart. A red channel. The top line is around 4780 as of 6 AM ET, dropping to 4778 in the opening hour in NY, and to 4775 at the close. That needs to be cleared to resume the uptrend. There’s a spport trendline at 4761 as of 6 AM, rising to 4766 at the NY close. They need to break that to signal any kind of downtrend lasting more than a couple hours.
Meanwhile, we’re starting the New Year with what looks like a turn in the bond market.
For moron the markets, see:
- Macro Liquidity – The Party’s Over January 1, 2024
- Swing Trade Screen Picks – Buying The Lagging Dogs December 20, 2023
- Not Even the End of the Beginning December 18, 2023
- Dealers Stay Extended December 16, 2023
- It May Be Gold, But It’s Not a Given December 15, 2023
- Tax Revenues and Liquidity are Crashing December 4, 2023
- This Chart Tells Us Exactly When the Bull Market Will End November 26, 2023
- A Rally Can’t Live on Hope Alone November 20, 2023
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