Look Out Bears! Fed New QE Now Up to $165 Billion
by ilene - September 20th, 2019 10:14 pm
Courtesy of Lee Adler
I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.
In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.
That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 billion in less than 2 weeks. Things must really be bad out there. Much worse than we can imagine.
But is it bearish? Typically, massive money printing can only mean one thing for asset prices. Up, up and away.
Fed De Facto New QE Announcement
Here’s the NY Fed announcement covering this New Fed QE.
In accordance with the Federal Open Market Committee (FOMC) directive issued September 18, 2019, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct a series of overnight and term repurchase agreement (repo) operations to help maintain the federal funds rate within the target range.
The Desk will offer three 14-day term repo operations for an aggregate amount of at least $30 billion each, as indicated in the schedule below. The Desk also will offer daily overnight repo operations for an aggregate amount of at least $75 billion each, until Thursday, October 10, 2019. Awarded amounts may be less than the amount offered, depending on the total quantity of eligible propositions submitted. Securities eligible as collateral include Treasury, agency debt, and agency mortgage-backed securities. Additional details about the operations will be released each afternoon for the following day’s operation(s).
Here’s Where the NY Fed Tells Us that New QE is Permanent
After October 10, 2019, the Desk will conduct operations as necessary to help maintain the federal funds rate in the target range,
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Is A Price Revaluation Event About To Happen?
by ilene - September 20th, 2019 10:10 pm
Courtesy of Technical Traders
Skilled technical traders must be aware that price is setting up for a breakout or breakdown event with recent Doji, Hammer
and other narrow range price bars. These types of Japanese Candlestick patterns are warnings that price is coiling into
a tight range and the more we see them in a series, the more likely price is building up some type of explosive price breakout/breakdown move in the near future. The ES (S&P 500 E-mini futures) chart is a perfect example of these types of price bars on the Daily chart (see below).
Tri-Star Tops, Three River Evening Star patterns, Hammers/Hangmen and Dojis are all very common near extreme price peaks and troughs. The reason they form is that price is unable to rally or fall far enough within a normal trading day to project broader range types of Japanese Candlestick patterns and these rotational/top/bottom types of Japanese candlestick patterns are often found at or near key reversal points in price. When they form in a series, like we are seeing currently, it is a very ominous warning that price will react in an explosive movement – either UP or DOWN. Be sure to opt-in to our Free Trade Ideas Newsletter.
Here are some examples of how these types of Japanese Candlesticks may appear in a chart.
Hammer type of patterns are similar to Doji pattern because the difference between the open/close price is very
narrow. Yet, instead of the Open/Close range forming near the middle of the price bar, Hammers form when this range
forms near the high or low of the price bar. They fall into the “umbrella” group of patterns and warrant a bit of extra consideration depending on where they form in price. The can often create very clear warning signals just prior to a major price reversal.
SP500 (ES) Daily Chart
This ES Daily chart highlights the sideways DOJI/HAMMER price channel that is
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Precious Metals Setting Up Another Momentum Base/Bottom
by ilene - September 20th, 2019 7:03 pm
Courtesy of Technical Traders
Just as we predicted, precious metals are setting up another extended momentum base/bottom that appears to be aligning
with our prediction of an early October 2019 new upside price leg.
Recent news of the US Fed decreasing the Fed Funds Rate by 25bp as well as strength in the US stock market and US Dollar as eased fears and concerns across the global markets. These concerns and fears are still very real as the overnight credit market has continue to illustrate. Yet, the precious metals have retraced from recent highs and begun to form a momentum base which will likely become the floor for the next move higher.
The one aspect that many traders don’t grasp just yet is that the US market could continue to push higher, just as they’ve done over the past few months, while precious metals continue to push higher, just as they’ve done over the past few months. The reality is the fear and greed driving the upside price move in metals is related to foreign market concerns (China/Asia, Europe/EU/BREXIT, Arab/Iran/Israel, and others). The true fear is that some type of war or economic event will start while the global markets are fragile. The recent news that the overnight Repo Market is seizing is another indication that the global credit market is very fragile. What will it take to launch metals higher? We believe the world is waiting for this next event to happen while this momentum base continues to set up.
Gold Daily Chart
This Gold Daily chart highlights the momentum base setup between $1480 and $1525. Any entry below $1500 is a relatively solid entry point for skilled technical traders. The next upside target based on our Fibonacci price modeling tool is $1795. Thus, the real upside move potential at this point is another +20% for Gold.
Silver Daily Chart
Silver is setting up a similar momentum base pattern after reaching levels just below $20 per ounce. We still believe the early October breakout date is relevant and we…
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Partisan divide creates different Americas, separate lives
by ilene - September 20th, 2019 2:55 pm
Partisan divide creates different Americas, separate lives
Even in the physical world, it’s hard to cross partisan lines. igorstevanovic/Shutterstock.com
Courtesy of Robert B. Talisse, Vanderbilt University
When people try to explain why the United States is so politically polarized now, they frequently refer to the concept of “echo chambers.”
That’s the idea that people on social media interact only with like-minded people, reinforcing each other’s beliefs. When people don’t encounter competing ideas, the argument goes, they become less willing to cooperate with political opponents.
The problem goes beyond the online world. In my new book, “Overdoing Democracy: Why We Must Put Politics in its Place,” I explain that in the United States, liberals and conservatives do not only differ politically.
They also live separate lives in the physical world.
This phenomenon was first documented in journalist Bill Bishop’s 2004 book “The Big Sort.” Scholars have found it has persisted into more recent years as well.
It turns out that people’s physical communities, surroundings and lifestyles can be their own form of an echo chamber. This separation is so complete that it includes not only the communities and neighborhoods where people live, but also where people shop and what brands they buy, what sort of work they do, where they worship, what sorts of vacations they take and even how they decorate their homes.
How personal do political divisions get?
It’s common knowledge that liberals and conservatives live in different places. After all, the idea of “red states” and “blue states” is based in reality. But preferences are much more local than that.
Liberals and conservatives in the U.S. systematically favor different kinds of physical environments. Even when they live in regions that might overall appear more politically mixed, liberals prefer walkable and ethnically diverse communities, while conservatives gravitate toward areas with larger houses and more private land.
Different preferences govern the most personal surroundings: One study shows that liberals and conservatives decorate their homes differently. Clocks and flags for conservatives, art and maps for liberals. According to the same research, they also fashion different workspaces.…
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Fed’s rate cut signals a recession may be ahead – and it may not have enough ammunition to fight it
by ilene - September 20th, 2019 1:23 pm
Fed’s rate cut signals a recession may be ahead – and it may not have enough ammunition to fight it
The Fed’s Jerome Powell keeps his cards close to his chest. AP Photo/Patrick Semansky
Courtesy of Michael Klein, Tufts University
The Federal Reserve seems a lot more concerned about the state of the economy than it’s been letting on.
The Fed lowered its target interest rate by a quarter point on Sept. 18, the second such cut since July – and the first reductions since the Great Recession more than 10 years ago.
Judging by the words of Fed Chair Jerome Powell, this isn’t that big a deal. In his statement following the decision, he said: “We took this step to help keep the U.S. economy strong in the face of some notable developments and to provide insurance against ongoing risks.”
True, the economy has been pretty strong for 10 years now, pushing the unemployment rate to a near record-low 3.7%. But in my view, as an economist and expert on monetary policy, Powell’s calm words belie a deeper concern. And, if a recession is on the way, the Fed may be ill-equipped to fight it.
Trouble brewing
A clear sign of the Fed’s concern is the back-to-back rate cuts, something that only happens during recessions or in anticipation of a downturn.
But there are many other troubling signs in the economic outlook.
For example, earlier this month, the Institute for Supply Management reported that manufacturing activity has slowed significantly. The sector actually contracted in August for the first time in three years. And although the unemployment rate remains historically low, jobs growth is slowing as a result of global trade turbulence.
Bond investors’ apparent deep unease about the state of the economy resulted in the inversion of the yield curve, which is often viewed as a harbinger of recession. Usually investors demand higher yields to lend for longer terms than for short periods. An inverted yield curve means that’s reversed, a sign investors are expecting trouble ahead.
The global outlook is also disconcerting. China’s economic growth…
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The Fed’s “Emergency” Actions this Week Were Dated 48 Days Earlier
by ilene - September 20th, 2019 10:35 am
Courtesy of Pam Martens
New York Fed Headquarters Building in Lower Manhattan
The storyline in the business press is that the lending rate on overnight repos had spiked to an unprecedented 10 percent, necessitating an emergency infusion of $53 billion by the New York Fed on Tuesday to ramp up liquidity for overnight loans and bring down the loan rate. (That was followed with $75 billion more on Wednesday, Thursday and today – raising the question that if the money is going to the same banks, isn’t that a term loan, not an overnight loan? We don’t know, however, if the money is going to the same banks because the Fed, as it did during the 2008 financial crisis, is staying mum about where the money is going.)
As it turns out, the Federal Reserve’s Federal Open Market Committee (FOMC) directive that authorized the Tuesday operation was dated July 31, 2019 – 45 days prior to the action. What was it that the Fed saw in the tea leaves back in July that prompted it to write that directive on July 31? This is the statement from the New York Fed indicating its first $75 billion operation on Tuesday, of which $53 billion was taken by the banks, was under a directive dated July 31:
“In accordance with the FOMC Directive issued July 31, 2019, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct an overnight repurchase agreement (repo) operation from 9:30 AM ET to 9:45 AM ET today, September 17, 2019, in order to help maintain the federal funds rate within the target range of 2 to 2-1/4 percent.
“This repo operation will be conducted with Primary Dealers for up to an aggregate amount of $75 billion…”
The largest banks on Wall Street are the Fed’s “primary dealers,” along with the U.S. units of numerous global banks. See the full list here.
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Precious Metals Setting Up Another Momentum Base/Bottom
by ilene - September 20th, 2019 4:20 am
Courtesy of Technical Traders
Just as we predicted, precious metals are setting up another extended momentum base/bottom that appears to be aligning
with our prediction of an early October 2019 new upside price leg.
Recent news of the US Fed decreasing the Fed Funds Rate by 25bp as well as strength in the US stock market and US Dollar as eased fears and concerns across the global markets. These concerns and fears are still very real as the overnight credit market has continue to illustrate. Yet, the precious metals have retraced from recent highs and begun to form a momentum base which will likely become the
floor for the next move higher.
The one aspect that many traders don’t grasp just yet is that the US market could continue to push higher, just as they’ve done over the past few months, while precious metals continue to push higher, just as they’ve done over the past few months. The reality is the fear and greed driving the upside price move in metals is related to foreign market concerns (China/Asia, Europe/EU/BREXIT, Arab/Iran/Israel, and others). The true fear is that some type of war or economic event will start while the global markets are fragile. The recent news that the overnight Repo Market is seizing is another indication that the global credit market is very fragile. What will it take to launch metals higher? We believe the world is waiting for this next event to happen while this momentum base continues to set up.
Gold Daily Chart
This Gold Daily chart highlights the momentum base setup between $1480 and $1525. Any entry below $1500 is a relatively solid entry point for skilled technical traders. The next upside target based on our Fibonacci price modeling tool is $1795. Thus, the real upside move potential at this point is another +20% for Gold.
Silver Daily Chart
Silver is setting up a similar momentum base pattern after reaching levels just below $20 per ounce. We still believe the early October breakout date is relevant and…
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What Are Your Thoughts: Is Anyone Really “Middle Class”?
by ilene - September 20th, 2019 2:49 am
What Are Your Thoughts: Is Anyone Really “Middle Class”?
Courtesy of Joshua M Brown
On a new edition of What Are Your Thoughts?, Michael Batnick and Josh Brown discuss:
- The Repo Rate mini-panic
- Are we ready for the Daniel Jones Era?
- Does it really take $350,000 a year to live in cities?
- Standup comics up in arms over political correctness and “cancel culture”
- People got excited about value stocks recently. Again.
- More terrible sports takes from Josh
- Do you need a car to live in New York City?
- and lots more.
Be sure to subscribe to their channel so you never miss an update
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Federal Reserve Bank of New York Statement On Repurchase Operation – Roll Over Beethoven!
by ilene - September 19th, 2019 10:19 pm
Courtesy of Lee Adler
This is a syndicated repost courtesy of NY | Press Releases. Original: Statement Regarding Repurchase Operation. Reposted with permission.
September 19, 2019
In accordance with the FOMC Directive issued September 18, 2019, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct an overnight repurchase agreement (repo) operation from 8:15 AM ET to 8:30 AM ET tomorrow, Friday, September 20, 2019, in order to help maintain the federal funds rate within the target range of 1-3/4 to 2 percent.
This repo operation will be conducted with Primary Dealers for up to an aggregate amount of $75 billion. Securities eligible as collateral in the repo include Treasury, agency debt, and agency mortgage-backed securities. Primary Dealers will be permitted to submit up to two propositions per security type. There will be a limit of $10 billion per proposition submitted in this operation. Propositions will be awarded based on their attractiveness relative to a benchmark rate for each collateral type, and are subject to a minimum bid rate of 1.80 percent.
– Federal Reserve Bank of New York
Meanwhile, if you haven’t read it already, my extended take on this is here:
Show Me The Money Jerry! Here’s Why Fed TOMO Repos Will Be a Feature Not a Bug
The new Fed TOMO (Temporary Open Market Operations) are the first sign that the Fed must move aggressively to counter the tightening of the money markets.
Now, I’ve been forecasting this for months in Liquidity Trader. We were well aware the massive waves of Treasury supply would collide with a shortage of cash. We also knew that the exponential growth in margin and repo lending would end badly. But the necessity for the Fed to act aggressively has come upon us much quicker than I thought it would.
And this could be a game changer.
The Fed Has No Choice- It Must Print
The Fed must print wads of money to counter the immense supply pressure of wave upon wave of newly issued US…
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At Press Conference, Fed Chair Powell Refuses to Answer Whether Wall Street Banks Are Too Big to Manage
by ilene - September 19th, 2019 10:05 am
Courtesy of Pam Martens
Fed Chairman Jerome Powell at Press Conference, September 18, 2019
Following a lack of liquidity on Wall Street, which necessitated the Federal Reserve having to provide $53 billion on Tuesday and another $75 billion on Wednesday to normalize overnight lending in the repo market, the Chairman of the Fed, Jerome (Jay) Powell held his press conference at 2:30 p.m. yesterday. The press gathering followed both a one-quarter point cut in the Fed Funds rate by the Fed yesterday as well as the first intervention by the Fed in the overnight lending market since the financial crash. (The Fed had to intervene again this morning, making another $75 billion in repo loans available.)
Fed Press Conference, September 18, 2019
The week’s unsettling events should have provided the basis for reporters to fire questions at the Fed Chair along the following lines: (1) Did the overnight repo lending rate jump to an historical high of 10 percent on Tuesday because some of the largest Wall Street banks backed away from lending? (2) With six mega banks on Wall Street holding 90 percent of the risky $272 trillion U.S. derivatives market and also a disproportionate share of Federally-insured deposits, could the U.S. see another 2008 type of crash on Wall Street? (3) Are these six banks too interconnected with each other, meaning that if one of them gets into trouble as Citigroup did in 2008, could it spill over to every other mega Wall Street bank?
While every major business news outlet was represented at the press conference, not one of the above questions was asked. One reporter, however, came close.
Hannah Lang, a reporter with American Banker, asked Powell about reports out yesterday that Bank of America was being investigated by the Consumer Financial Protection Bureau for opening unauthorized accounts. She asked if the Fed was also investigating this and said that given the pending order against Wells Fargo for the same kind of behavior, if Powell was concerned that these banks are too big to manage.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site