The futures are pulling back this morning a day after Jaysus Powell channeled Mario Draghi and promised that the Fed would do whatever it takes to keep the US economy afloat.
It’s Fed Carnival! That’s in honor of the Fed bailing out the sinking Carnival Cruise Lines. What will it think of next to bail out its cronies, and the markets? Here are a few thoughts.
Meanwhile here’s a look at how the stock market sets up today.
The Fed is absorbing just a fraction of this week’s massive Treasury issuance, but stock futures continue to levitate and have broken through a key resistance level. Smoke and mirrors, or just smoke from burning cash.
That’s because the dealers and their institutional customers need to absorb $241 billion in Treasury issuance this week. How the hell are they paying for that? The Fed is only covering a fraction of that this week.
The Fed is really tightening the screws on Primary Dealers this week. So far, stock futures traders are laughing and farting in the bears’ general direction.
The Fed has spent a couple gazillion over the past two weeks and the stock and bond markets have only been flat. Is that a good thing? I doubt it. Looking ahead, the Fed won’t be pumping enough to keep the dealers afloat.
The market is on easy street today. It’s getting its usually daily injection from the Fed, while the Treasury is sidelined, not doing any borrowing today. So all that cash gets to sit around for a whole 4 days until a new wad of Treasury supply hits.
Meanwhile, at the Dear Leader’s suggestion, Trump supporters inject themselves with bleach or isopropyl alcohol to stave off infection with the virus. That’s a good thing. Let’s hope it’s the start of a trend that flattens the curve so we can all get back to normal lives.
The Fed gives Primary Dealers money every day now. The dealers use that money to buy Treasury paper from Uncle Sam. Whatever the dealers don’t need for that purpose, they use to create mischief in the financial markets. You really need to know how much money they’re getting, how much they need, and how much mischief is coming as a result, every day. I’m happy to help you get that information.
So much for social responsibility. Sweden’s rate of new infections is 3-5 times greater than its neigbors Norway and Denmark. Its death rate is 15 times greater.
The dealers got a windfall from the Fed over the past couple of days. They used that to foment a rally in stocks. But it has been kind of puny relative to what we’ve gotten used to in recent weeks. And it looks suspiciously like a potential right shoulder of a head and shoulders top pattern on the hourly chart.
Of course, wishful thinking will kill you as a trader, and seeing a potential right shoulder is wishful thinking.
