20 replies to this topic

[beta]

You'll get your chance to "buy cheap."  Much cheaper than most can imagine. 

 

We are nowhere close to a bottom.   If my wave count is correct (valid > 2604),  we are only in the 3rd inning ... any bounces from here will be weak, and not worth buying.

 

Bears have won.  

Edited by beta, 19 December 2018 - 07:14 PM.

[dTraderB]

Lots of good trading opportunities coming up, Long & Short

 

Rally, then down big, several more rallies, lower lows, then bottoming out in March or April 2019

[CLK]

Well I hope they can buy this back up to 2560 at least tomorrow before turning back down.

[dTraderB]

VIX was almost flat 

VXX was slightly down

 

SPX tanked

 

both VIX and VXX should have been up by at least 3%

 

STRANGE 

[CLK]

VIX was almost flat 

VXX was slightly down

 

SPX tanked

 

both VIX and VXX should have been up by at least 3%

 

STRANGE 

 

 

I might be wrong but I think it had something to do with pre FOMC premium buildup that collapsed after the news.

[LMF]

No matter what the market actually does after an FOMC announcement......today has become a major league communication problem where the current Fed does not seem to be able to adequately telegraph things properly in advance of the announcement.  Greenspan was better.  Bernanke was better at it.  Yellen was better at it than today demonstrated.  This is simply an off the wall situation that has come out of nowhere.  There is no uncertainty at all, that today went in the wrong direction.....an insane problem with the Fed that the markets have never seen before.  The Fed can not be operating like this, when we're going to get a press conference after every meeting next year.  A rate hike today was absolutely inappropriate based on how the RUT looks on the charts.....the only time it has ever happened was when the Fed was at the beginning of a rate cycle.  Not the end of a cycle that's been going on for years.

[LMF]

Here's the point of it all......if the Fed can't do any better at telegraphing it than they did today, the FOMC announcement needs to be done after the market close.  But even then, their analysis supporting a rate hike today was extremely suspect.  It was a definitive policy error, and that can't be good for the markets.  2019 may turn out better as it unfolds, but today they missed the dart board completely. 

 

The policy errors in the past have been the result of the Fed rate exceeding the US 2 year treasury yield......the Bernanke mode in 2007.  My guess is that we may see this soon enough in 2019.  Time will tell.....

[dTraderB]

It's a major error by the FED and they will be trying to walk and talk it back when they realize how serious it is

 

Markets quite active after hours. 

----------

This is one of the BEST columns on the FED's error & misunderstanding:

 

Federal Reserve Chairman Jerome Powell may have just made a big mistake.

Bloomberg‏Verified account @business 1h1 hour ago

More

 

The Fed has badly misjudged the level of anxiety in markets, says @JohnAuthers https://bloom.bg/2CnAEX8  via @bopinion

"The market and the Fed are at odds. At this point, it’s not clear who deserves to win. Powell seems to have badly misjudged the level of anxiety in markets about QT and the effect it’s having on liquidity. The markets seem to be moving to discount an imminent recession in a far more extreme way than anything in the data currently supports. Sadly, for investors, Powell is not quite the QT they had hoped."

https://www.bloomber...arkets-jpvwfx42

[pdx5]

 

You have to watch out for put/call analysis.....it's usually meant for conditions above the 200 day MA.  Pullbacks that are bullish, with the 200 day MA rising.  Not the conditions we have now. 

 

Today had to be the secret test to identify suspect members of the FOMC that voted for a rate hike.  Every one that did needs to be put on administrative leave for the next 12 months.   

 

 

 

So, 5x off the 09 lows not enough ? What would be a fair number. 5k, 10k S&P ? Markets can't be allowed to just turn into another Bitcoin without bear markets regularly. People are upset because there is no safe spot to buy the dip now. Just be glad most bear markets are over in 2-3 years. I personally want another chance to buy cheap for the long term in cash positions and not have to rely so much on leverage to try to catch the last 10% of a bull market.

 

Good post, CLK!

 

It is about time FED stopped acting as the PPT (Plunge Protection Team).

[dTraderB]

This is good!

 

Markets get a sinking feeling: maybe the “Powell put” doesn’t exist

 

The Federal Reserve raised US interest rates yesterday.

The move was well-telegraphed. It was even expected.

Yet markets threw a hissy fit.

What’s the problem?  

 

No more Mr Nice Guy

If we ever needed confirmation that markets have grown far too comfortable with the idea of the “Greenspan put”, then we got it yesterday.

The US central bank, the Federal Reserve, put interest rates up by 0.25%. The key US interest rate now sits in a range of 2.25%-2.5%, up from 2.0%-2.25% previously.

That was no surprise at all. It’s what the market expected. However, there’s often a difference between what the market expects, and what it’s secretly hoping for.

The market certainly had expected a rate hike. A cautious hope had been creeping in that the Fed would pause this time, but in all, investors really would have been surprised if Fed boss Jerome Powell had decided not to raise them (although that would have been a dead cert under Ben Bernanke or Janet Yellen).

But they did expect Jay to at least throw them a bone. To pat them on the head and tell them that they’d been good boys and girls, they’d had a tough 2018, and maybe now it was time for a little rest.

That’s not what happened.

The funny thing is, Powell probably did think he was playing nice. The communication after the event made it clear that the central bank now expects to raise rates fewer times (two to be precise) next year than it did before (it had previously hinted at three).

The problem is, the market had already bought its own hype. One thing you could guarantee under both Yellen and Bernanke was that you should never underestimate the Fed’s capacity to be dovish. So if you were a smart trader, it paid to take the market’s expectations and then undershoot them, because that’s exactly what the central bank would aim to do.

It increasingly appears that the game has changed, and I’ll admit it surprises me too. The Fed didn’t even nod to the recent market turmoil.

No wonder the market was sulky: “I go to all the effort of staging a correction and you don’t even pay attention? No Santa Claus rally for you!”

The other issue that appears to have rattled the market was the idea that quantitative tightening (QT) is on autopilot. Under quantitative easing (QE), the Fed printed money to buy government bonds (and other bonds). Even when it stopped QE, it kept reinvesting the proceeds. Now it is allowing that money to run off at a rate of $50bn a month. In other words, that money is coming out of markets rather than being pumped into markets.

If you believe that QE artificially inflated markets (and I think that’s a fair interpretation), then it’s hard not to expect that QT will remove any of the overvaluation that’s down to QE.

Why are bonds rising?

The thing is, what’s interesting about all this is that the Fed is no longer buying bonds, while the US Treasury is issuing as many as it can pump out. That should drive their prices down (because there’s more supply) and yields higher. Yet that’s not what’s happening.

That seems weird, doesn’t it? But not if you think about how QE actually worked.

The best description for QE (one I'm pretty sure originated with James Ferguson of the MacroStrategy Partnership) created a “hot potato” effect. The Fed bought government bonds. This drove down yields and drove up prices. So people who’d normally own government bonds bought high-quality corporate bonds instead. They bounced the usual owners out into high-yield (junk) bonds or equities instead.  And so on up the risk chain.

If you agree that this is how QE worked, then the implication is this: the main asset that benefited from QE-driven price inflation was not the least speculative asset (government bonds), but the most speculative asset (bitcoin).

This whole year has been a story of how QT is affecting the asset market. Bitcoin has cratered. Emerging markets then took a pasting. High-yield credit is starting to hurt. Basically, everyone is retreating back down the risk spectrum, as Jim Leaviss of M&G put it at the latest MoneyWeek roundtable. 

In other words, as the speculative froth is blown off, a lot of money that was “crowded out” of government bonds by central bank action is rolling back into them now. So the US may be able to get away with running its big deficit for a while longer (though not indefinitely).

So what happens now?

https://moneyweek.co...the-powell-put/