Money Rushes Into the Vortex, May 25 and Closing Bell

No explanation needed. Old trend lines die off, and new ones are formed. “They” are putting (some) money into this and there is a confluence of lines, some trend lines, some old support / resistance lines, which often have more catlike lives than you imagined. This isn’t a big MONEY push, just a probe really. Try to establish the connection, the old Fed PUT which everyone is sure has died.

The Fed is only 1/3 of the A/D, which is long term money flows (as a component of money flow). The other two components are Warren Buffett money, and there is a lot of that, in stock market wealth, and share buybacks which taper off when the market sours. Shareholders get upset when the company spends money on buybacks when earnings and the economy are not doing so well. Go figure. Reverse Repo topped 2 trillion, I showed you the charts. The banks are hemorrhaging cash even while the Fed is winding down QE. What would happen if they started that program up again?

The technical signals seems to be working which is a sure sign that money flows are not. Real money would cut through those minor trend lines without a second thought.

Note the blue box with the after markets close, they took some lift out of the days actions. “THEY” have been doing the daily lift every day for about a week without much to show for their efforts. That shouldn’t concern the bulls too much, they are trying to establish a positive volume pattern in the action. Is this an actionable bottom,?Yes, as long as the ‘line in the sand’ remains in place. As long as they keep a stream of cash flowing in increasing levels, the market can leverage even sand and string, if it there is something behind them.

Then fast forward to the 26th…………………………….

After they were up 1% I thought this is a 2% day, and so far it is. The sellers have stepped out of the room, but sellers want higher prices. The interesting part of the action today is that the stock market rally turned around the selloff in CRYPTO, at least for the moment. This is the old ALL-IN-ONE Market rally, sort of, they aren’t pushing gold or silver. And the FAANGS roar back in unison which is to say they are riding the index. It remains to be seen how much more selling in the FAANGS, is left. The INDEX buying will probably mask the differing opinions, and selective selling kicks in, that will cause a pullback in the indexes BUT PROBABLY NO NEW LOWS in the indexes. On up days you want to be in the SPY, and on down days, sell select technology basket cases. The collapse in the prices of these has been obscured by the modest losses in the indexes.

Reading the Fed minutes (yes I did) there are several instances of the word uncertain (that means the rate hike-a-palooza might be deferred if any number of the well understood exogenous factors should occur- they also expect GDP to remain strong – and are well aware of the one off, offset that affects that number: exports of energy. Maybe less crude oil will be sold to (lock-down-ed) China. So much for rhetorical boilerplate.

‘They’ interpret events in Ukraine to be generally improving, and coupled with the term “uncertain” that means there is plenty of extra baking powder in this cake. They left themselves some room, and should they hesitate on normalizing, and GDP continues to thunder ahead, who could blame them for allowing the economy to overheat a tad bit more, while signs of persistent inflation fail to materialize (very subjective).

Inflation remained elevated, reflecting continued supply and demand imbalances, higher energy prices, and broader price pressures.

The Price Pressures item would be commodity related raw materials, and labor market tightness which neither bodes well for corporate earnings (and market stability) which they also keynoted. The suggestion was made that if the gap between vacancies and hires were to be somehow resolved, and that could happen if business cancelled the vacancies, by withdrawing the offer to make new hires, and that would not impact GDP negatively, ergo the employment number. (Are they coaching their corporate brethren?)

Thinking outside the box government directed infrastructure is several years behind, and languishing, while even main stream Democrats are pushing back on big spending programs. Soros says Putin must be defeated, Kissinger says we must not push him over the edge (and Henry lives in Connecticut) . So 40B aid to Ukraine including top flight weapons is not much; some in the Pentagon are salivating to use these weapons, while others are reluctant to let our adversary know what we have. Look at how much the US has learned about the capability of the Russian military.

The Pentagon could approach some critical threshold where the cat is out of the bag, and they will be forced to use these weapons in a decisive fashion. (They cannot afford to use their best weapons systems in a haphazard manner – they must count for something) The top planners are hoping Putin is replaced without a fuss, much like the peaceful transition of US power after the 2020 election [SNARK]

The market is really more afraid of the political situation in the US this November, conspicuous in the FOMC minutes, by it’s absence. Biden talking tough about Taiwan was a rejoinder to the Bush (and Neo-conservative??) Republicans, of which Trump is one on this issue, which I explain in my Short Modern History of the GOP. All Trump did in his brief and feckless tenure was reiterate Bush policy (on Taiwan) and introduce the ancient tribal ceremony of ritual regicide, in which the former leader is humiliated to provide context for the current party affiliated autocrat…) What Biden meant of course is that the US will supply the systems for Taiwan to defend itself in like fashion to the war in Ukraine which has caused the Fed to make numerous references to the term uncertainty, thus removing at least one of the triggers for their proposed harsh monetary tightening. Trump had to yell and scream at Powell to bring about the end of the 2018 rate normalization program. Biden may have gained in one simple statement the same benefits. The election really was about competency wasn’t it?.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s