Our friend Potatohead reported over the weekend that the CME had called for more margin on stock futures.
On 8/3/2024 at 6:39 PM, potatohead said:
Then pre market trading opened on Sunday night and the result was predictable. Once the liquidation to meet this mass margin call is complete, we should get a rebound. On the other hand the plunge in the markets will generate more margin calls this afternoon. To quote Professor Berra on the subject of margin selling, “It ain’t over till it’s over.”
That said, the 5 day cycle projection of 5195 was overshot. And there are a ton of spport lines in the 5175-80 range. So I’m half expecting a decent bounce from a huge down gap when New Yak opens on a vomit. But I’m not sure how long that bounce can be sustained. The top of the downtrend channel will be at 5215 in the opening half hour of NY trading. At 1 PM it will be at 5200. At the close it will be around 5185. They need to clear that go get bottom formation started.
Meanwhile, I had reported last week that dealers were mispositioned on the short side in Treasuries and that this was a problem for the stock market. This has borne out. Why Primary Dealers Net Short Fixed Income Is Now Bad News for Stocks
The short squeeze in the bond market is contributing to the stock crash. This is a self reinforcing vicious cycle where one feeds the other. It also creates the currently false perception that the economy is contracting. Of course if the financial market dislocation persists, that will become a self fulfilling prophecy. If the stock market crashes, the economy will ultimately follow.
Meanwhile, look who’s short the 10 year. Dealers (red) and hedge funds (blue). The most leveraged jackasses on the planet.
Here’s the current picture this morning on a yield basis.
For moron the markets, see:
- Tax Collections Were Worse than the Jobs Report But… August 5, 2024
- Why Primary Dealers Net Short Fixed Income Is Now Bad News for Stocks August 1, 2024
- Stars Suddenly Align for Gold August 1, 2024
- Swing Trade Screen Picks – Letting It Ride July 29, 2024
- Topping on the Cake July 29, 2024
- End Stage Hysteria Breaks July 24, 2024
- Picking Up Nickels in Front of a Steamroller July 9, 2024
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 folder.
