11 hours ago, TurdButter said:So, would the most bearish thing the Fed could do be to significantly increase the scale of QT? If they happened to increase monthly QT volume by 50% and did not hike would that be more negative than raising FF target by 50 bp but leaving QT volume unchanged? Interested in hearing from all.
Yes, that would be something. Highly unlikely though I would think.
Interest rates don’t are a market price. They’re an effect, not a cause. The Fed doesn’t set rates. It ratifies the market. Interest rates have no causal bearing on stock prices. Most bull markets in stocks have been accompanied by rising rates. Both are driven by demand and reflect the price of uses of the available sources of liquidity.
Tight money causes bear markets. Tight money has many causes. The Fed and its cohorts can do it, or markets can loosen or tighten without central bank interference. Margin is the purest example of that two way street.
That said, when the big 3 central banks are moving in concert toward tightening, the forces of monetary tightening will limit bull markets in breadth and duration.
As for the daily look, the ES 24 hour S&P futures tried to break out over the past 24 hours, but so far has been contained within the 3 week uptrend channel. The top line rises from about 4380 at 7 AM New York time, to 4385 as of the NY close. Don’t get too excited if they clear that. There’s a second, parallel trendline about 5 points above it. If they break that, then get excited.
The 5 day cycle is due for a brief down phase today, but I’m not counting on it. There’s a 5 day cycle projection that looks anywhere from 4430-4450. So this is set up for another Fed resubstantiation rally.
The market is what it is, not what it “should be.”
Rally Broadens as It Gains Momo
Lest we forget, the bond market has been in a bad mood since April. The TLT, 20 year Treasury ETF, a bellwether for the entire bond market, has lost 7% of its value since then.
Commodities have been in a bearish trend since January.
Energy bearish since January.
Retail bearish since February.
What about real estate?
There’s just not enough liquidity to support broad spectrum bull markets such as we got used to in the QE era from 2009 to 2022. But there’s clearly enough to support some sectors, especially the institutional darlings.
In the late 1960s- early 70s, we had a brutal secular bear market in fixed income and the vast majority of stocks. But the Nifty Fifty kept rolling on because institutions loved them and they directed their cash toward them. I remember also a gigantic bubble in gambling stocks around that era.
So all this crying and moaning and gnashing of teeth about a tech bull market. Yeah. So what. It’s nothing new. There have been markets very similar to this in the past.
It helps to have experienced them. Then you can be on the lookout for sectors that will outperform, like tech. We saw it coming months ago. That tech would be strong was no secret. It did not come out of the blue. The sector rose from a well formed base after a cyclical bear market. Now it’s in a bull market again, but everything else still looks like shit.
Will other sectors catch up? No. But they may tag along now and then. Tradeable rallies should be the norm. Likewise there should be some shortable declines ahead too. Stay tuned.
For moron the markets, see:
- Rally Broadens as It Gains Momo June 12, 2023
- Swing Trade Chart Picks – Let Your Profits Run June 9, 2023
- Gold Set Up for This Cycle Low June 7, 2023
- Investors Breathe Sigh of Relief But D-Day Is Now June 6, 2023
- Incomprehensible, That’s What You Are June 2, 2023
- Modestly Hedged Dealers, Record Short Hedge Funds Suggest Disaster Ahead May 25, 2023
- The Most Widely Forecast Economic Disaster In History May 16, 2023
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