At first glance earlier this morning, this setup looked bullish. Now it’s 55-45, in my view. They’ve got work to do, and if they fail, this could just as easily fall apart.
A 3 day cycle low is due around the NY open. They need to hold above 5183 on the ES in that first half hour of regular trading. Failing that, the odds would start to shift toward the downside. They need to be above 5190 at the NY close for a bullish look. On the other hand, if they break 5155, this could get very ugly going into Friday, or Monday. On the other hand, if this ends above 5220 today, that starts looking more bullish. Implications of Market Ahead of Itself
Meanwhile, another $5 billion came out of the Fed’s RRP slush fund yesterday, bringing the net withdrawals to $112 billion since July 24. That slush fund will be out of cash really fast if this keeps up. Much of that was directly driven by CME margin increases, but some was also due to the short squeeze in bonds.
Mind boggling when you think about it. More than $2 trillion has been withdrawn from the slush fund since April 2023. I had forecast this and we’ve tracked its progress right along the way. I also made a prediction about what will happen when the fund runs dry. No more water in the well, oh no. Why Primary Dealers Net Short Fixed Income Is Now Bad News for Stocks– August 1.
Over in the Treasury market, the bearish hedge positioning of the dealers, and extreme bearish positioning of hedge funds in the futures have triggered an awesome short squeeze. That squeeze has exhausted itself and partly reversed over the past 3 days. As I described in Liquidity Trader reports, that mispositioning is part of the reason for the liquidation of stocks. When margin calls come, those needing to cut exposure raise cash across all investment classes. I cover what to expect in Liquidity Trader.
For moron the markets, see:
- Swing Trade Screen Picks – Missing 80% August 5, 2024
- Implications of Market Ahead of Itself August 5, 2024
- 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
- End Stage Hysteria Breaks July 24, 2024
- Picking Up Nickels in Front of a Steamroller July 9, 2024
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