After 5% up in a couple days the market is just cooling it’s jets. The Bulls appear to be waiting to see what the Bears have got. (Sellers want higher prices – if they can’t get them they will take what they can get – if the Bears cannot produce results in the Bullish vacuum, then the Bulls will fill the void) A drop would result in today’s action turning into the “Dog chasing car scenario”, where prices drop in concert with that nifty trend line set off two consecutive one minute bars at the open.
If you follow my charting you know these one minute trendlines often have lasting influence. In the great Bull market, (last throes?) they were reconciled after a few hours, or days, rescued by the money as it were. So we have to see if the Fed PUT is really alive, ALIVE!!, or something else is going to be needed. Two trillion of Reverse REPO means cash on the sidelines is bleeding out of the market, and today bond yields took another step higher. You want to feed the Bulls you need to see them lined up at the REPO window to borrow cash, in order to recycle it into stocks.
The smart guys are betting on a pullback in less Fed hawkishness. (double or triple negative). A threat of recession, market stability, all those key phrases. The Fed wouldn’t deliberately inflict pain on investors, (would they ??- no not without telegraphing their intentions, and they have hedged their bets to coincide with this selloff, while very few shares were actually thrown onto the table.
Fed’s inflation expectations of 2% next year needs to show us something now. With interest rates nudging higher portfolio insurance is more dear. The real question: is the Fed assertive enough to force the fat cats to let go of the mouse? to actually kick out some shares from their vault. My own thought when the market volume washes out in that fashion it is very much easier for the Fed to work it’s monetary rescue moves.
And is that what the Fed really wants? Is capitulation over-rated?? The big edge the Fed has is that it controls the CRYPTO market, which now bends with the wind that drives all other asset classes, and the Fed (or its consigliere, the SEC can do that…. ) or perhaps the current Don can sanction CRYPTO. Crypto’s reputation as a safe currency isn’t living up to the hype. This all spells a (old) moneyed BULL rally, but we need to see some indicators that mere technical indicators are willing to submit to money flows. That is the measure of the current situation.
The money flows were flat to the close and then a super BOOYAH surge, at the last minute, (could have easily been a down leg but it wasn’t) and so we should look for more moneyed pushing soon. Today was a DOJI on the daily charts. That implies slowing of the rise, but don’t believe it. When the money takes over, nothing else matters. Has the money taken over??
The money isn’t flowing downhill anymore. The big players took their hedges off last week and now they are working without a net, so they have no choice but to buy stocks. The market is a shark, it has to swim or it dies. Any sign of the Fed PUT, and that would seal the deal, rising prices on low volume, and low cost margin debt, is always the best case scenario.
As manager holding a trillion shares, you can pump what you already own with just a little bit of leverage. (Then after Hunters MELTUP comes the crash of all time) The FED PUT is the case for the MELT-UP. No surprise the Feds so called rate hikes aren’t really working. Target range is 75-100 and EFFR is at 83. SOFR is at 78.
What happens if they are feeling hawkish next month, and they want to extend the range to 100-150 and they’re still at 83. They don’t control rates. You can’t get there from here. Either some of that tightening gets into the market, or the FED is done. There is the rub, because the FED can be more hawkish the higher the market goes. Problem is their policy doesn’t walk the walk.
On the daily OBV is starting to pick up and A/D is a bit flattish and MFI poked its head above the downtrending benchmark. It makes a lot more sense if the short and intermediate money picks up and the long term money stays back. The long term money is there to buy shares when the other two groups start unloading, so the process can reload. That much looks healthy to me. 430 is a logical goal.
The strong hands are not interested in buying more stock they are interested in promoting the churn, to raise prices (with the help of the Fed) on the stocks they already own, so they can leverage them (see Elon Musk, if he can pull that Twitter deal off without using too much TESLA stock as collateral then you know Mr Market is humming on all eight cylinders). Just not sure what the reasons are to leverage, lousy market for IPOs, and if GDP slows down so does CAPEX and the like. If the FED can’t get off the snide with these rate hikes then MELTUP looks less like an anti-dystopian fantasy. Rather than put money into new investment you buy back more shares, and just buy more shares, and the more you buy the faster the squirrel cage spins.