That’s right. Apologies for repeating, but when liquidity is tight, and getting tighter, these buying surges rob demand from the future. And that is true whether this is the commitment of “cash on the sidelines” (rarely) or short covering (usually).
Now, here we see evidence that indeed there was a rush of cash off the sidelines and into the markets yesterday. Not just for stocks, but especially for Treasuries. The Fed’s RRP money market fund of money market funds by money market funds, and for money market funds, so that they shall not perish from the earth, dipped by $173 billion. That’s a lot of cash to commit to the markets in one day.
But wait. What’s this? You say that big drops like this happen at the end of every quarter? Dressing up Macy’s window for the regulators and customers, you say?
Can I hear an Amen? This drop wasn’t even the largest end-of-quarter drop by far. I think that it’s safe to conclude that there was no movement of cash from the sidelines, except to the extent that the gang was finished showing what they wanted to show their investors when they closed the books for the quarter.
So I think that we can also safely deduce that these rallies in both stocks and bonds were driven by short covering. And that’s bearish. Because once the shorts have covered, who will buy my wonderful stocks?
But meanwhile, the rare but not unusual megaphone pattern at the lows on the hourly chart of the ES, 24 hour S&P fuguetures continues to broaden. The last peak was at 3736. Approaching 5 AM in New Yak City, the ES is about a point shy of clearing that. If it fails, bears should get ready. But if they get through, the pattern suggests a target of 3777 at 2 PM ET.
The technicals lopsidedly favor the upside for at least the pre market and AM hours in NY. The 5 day cycle projection of 3760-75 is consistent with that. Hourly cycle oscillators and momo have broken out to new highs and remain at very strong slopes. This thing looks higher.
Meanwhile, back at the big picture:
- Swing Trade Screens – Beware! This Swing is Old October 3, 2022
- Stocks Have Much At Stake Right Now October 2, 2022
- Gold Reason to Hope No Reason for Optimism September 30, 2022
- Markets Face Catastrophe as Dealers Mitigate Too Little Too Late September 26, 2022
- Fed Speeds Into Dead Man’s Curve, More Black Tuesdays Ahead September 15, 2022
- There Will Be More Black Tuesdays September 14, 2022
- Withholding Tax Collections Collapsed in August But BLS Data Won’t Show It September 2, 2022
- Warnings of August Liquidity Crash Come to Fruition – Here’s What to Do August 28, 2022
If you’re serious about the underlying forces of supply and demand that drive the markets, join me!
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