Archive for the ‘Lee’s Free Thinking’ Category

Federal Reserve Bank of New York Statement On Repurchase Operation – Roll Over Beethoven!

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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Show Me The Money Jerry! Here’s Why Fed TOMO Repos Will Be a Feature Not a Bug

Courtesy of Lee Adler

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 Treasury securities of all durations. This supply pressure will virtually never end, as the government finances a booming US economy with constant, massive deficit spending, or, what some call “defecate” spending.

The Fed has actually been tight since 2014. It got tighter in 2017 with “normaliztion” of the balance sheet. The ECB and BoJ effectively tightened in 2018. All 3 of the big boy central banks were forced to reverse course over the past couple of months. The ECB is loosening more aggressively than the Fed. The Fed had merely gone from tight to less tight.

Until this week. Suddenly, the Fed has been forced to become loose, very loose.

That’s because there’s no longer enough cash in the system to absorb what the US government deficit spending dumps on to the market. The shortgage of cash has meant that dealers and others have been forced to use debt in the form of repo and margin borrowing to finance the ever growing wads of US TP (Treasury paper) bombarding the markets.

With Cash Shortage, Fed Must TOMO Repo

If the Fed wants to maintain the appearance that it controls interest rates, it has no choice but to print the cash needed to buy up enough paper to keep private market short term rates from continually spiking to 5-10% as they have this week.

The Fed’s instant reaction so far has been to use the tool…
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Is The Drone Strike a Black Swan?

Courtesy of Lee Adler

Pundits are calling yesterday’s drone strke a “black swan.” Can a drone strike on a Saudi oil facility, be a “black swan.”

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

I seriously doubt that no one expected or could have predicted a drone strike on a Saudi oil facility.

black swans and drone strikes are common.

Call Me A Black Swan Skeptic

Or maybe I’m just one of those “nothing surprises me” skeptics. For example, the creeping Trump dictatorship, about which most people are still in denial, hasn’t surprised me for one second. Nor would it surprise me if he and his sycophants are overwhelmingly defeated in the next election.

It would also not surprise me if there is no election, or if it is rigged for him to win. A military coup would not surprise me. A White House coup would not surprise me.

The end of constitutional government would not surprise me. I’d be more surprised if a functioning constitutional government of laws re-emerged. I’d like to think it can happen. I just think that the trend isn’t exactly promising.

With Black Swans Everywhere, Wall Street Says, “Close Your Eyes!”

And I surely don’t think that the collapse of the housing bubble and the ensuing financial crisis were black swans. Millions of people recognized the housing bubble. And many, many observers recognized it, foresaw what would happen, and even ran websites chronicling the housing bubble and warning of its demise.

I should know. I was one of them. But that was nothing special. There were hundreds of us, all with thousands, or tens of thousands of regular visitors and commenters. Millions of people were paying attention and talking about the bubble risk in 2004-2005-2006. They just weren’t Wall Street bankers or economists, who were too busy trying to shove your head up your ass so that you didn’t see all those black swans swimming with the sharks.

Everything…
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Nonfarm Payrolls Not Seasonally Adjusted Tell the Real Story – Unspinning Wall Street™

Courtesy of Lee Adler

Not seasonally adjusted nonfarm payrolls, that is, the actual numbers, give us a truer picture of the jobs market than the seasonally adjusted garbage that Wall Street spews.

Friday’s seasonally adjusted nonfarm payrolls jobs headline numbers disappointed investors with slower than expected growth. But was it really that bad?

Here’s How The Street Spun It – Wall Street Journal

Modest August Job Growth Shows Economy Expanding, but Slowly

Employers added 130,000 nonfarm jobs, jobless rate held steady at 3.7%

U.S. employment grew only modestly in August, suggesting that a global economic slowdown isn’t driving the U.S. into recession but has dented growth.

The U.S. economy added 130,000 payrolls in August, the Labor Department reported Friday, and has averaged 156,000 new jobs a month over the past three. That was down from average growth of 190,000 a month in the eight years since employment started picking up after the last recession. The August tally was propped up in part by the addition of 25,000 temporary Census Bureau workers…

 

Marketwatch

The Journal’s sister publication under dirty old man Murdoch’s smelly trenchcoat, Marketwatch.com, said that the number would push the Fed to cut interest rates again. The token liberal among dirty old Rupert’s organs also noted the analyst miss. Marketwatch blamed the trade war, of course, and noted that Census Bureau hiring padded the number.

U.S. creates just 130,000 new jobs in August, keeping Fed on track to cut rates

The economy added just 130,000 new jobs in August, marking the smallest increase in three months and offering more evidence that hiring has slowed amid a broadening trade dispute with China that’s disrupted the U.S. and global economies.

The soft employment figures are all but certain to keep the Federal Reserve on track to cut interest rates later this month, even after another sharp increase in wages. Hiring fell well short of the 170,000 MarketWatch forecast.

The gain in new jobs was even weaker if hiring tied to the upcoming U.S. Census is stripped out.

But How Bad Were Not Seasonally


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Watch Out Bears! Fed POMO Is Back!

Courtesy of Lee Adler

That’s right. The Fed is doing POMO again.  POMO means Permanent Open Market Operations. It’s a fancy way of saying that the Fed is buying Treasuries, pumping money into the financial markets.

Over the past 6 days, the Fed has bought $8.6 billion in T-bills and coupons. These are the first regular Fed POMO Treasury operations since the Fed ended outright QE in 2014.

Who is the Fed buying those Treasuries from?

The Primary Dealers. Who are the Primary Dealers?  I’ll let the New York Fed tell you:

Primary dealers are trading counterparties of the New York Fed in its implementation of monetary policy. They are also expected to make markets for the New York Fed on behalf of its official accountholders as needed, and to bid on a pro-rata basis in all Treasury auctions at reasonably competitive prices.

The Fed is Doing POMO, Injecting Cash Into Primary Dealer Accounts

When the Fed buys Treasuries from the Primary Dealers, the Fed pays them by depositing money in the dealers’s accounts at the Fed. When the dealers get cash from the Fed, you know what they do with it! They do their business. They deal. They use the cash to accumulate inventory, whether Treasuries, stocks, or whatever else they make markets in.

The dealers have had a big problem lately. They’ve been forced to accumulate unusually large inventories of Treasuries, particularly this month. That’s because the Trump Regime and the rump Congress agreed to lift the debt ceiling that had been in force since March.

The Treasury market is under assault, being deluged with new supply. Amazingly, the Treasury market hasn’t buckled. It has had the benefit of a worldwide capital flight into Treasuries as foreign economies and markets weaken. Negative interest rates have also helped drive European capital into Treasuries.

Until early August the Treasury market also had the benefit of hundreds of billions in T-bill paydowns flooding dealer and investor accounts with cash. That game ended when the debt ceiling was lifted a few days ago. The Treasury market no longer has that tailwind. Now, a massive flow of new supply creates an equally large headwind. …
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The Treasury Supply Drumbeat Has Begun

Courtesy of Lee Adler

The beat goes on. The US Treasury announced a 30 year TIPS issue today, bringing net new Treasury supply for the month so far to $119 billion. 

Here are the details:

Term and Type: 29-Year 6-Month TIPS

Reopening: Yes

Offering Amount: 7 Billion

Announcement Date: 08/15/2019

Auction Date: 08/22/2019

Issue Date: 08/30/2019

Maturity Date: 02/15/2049

PDF | XML

Supply will pound the financial markets to a pulp as far as the eye can see. Those who are currently panicking to buy Treasuries at these levels near all time lows in yield, are picking up nickels in front of steam rollers.

I’ve been warning Liquidity Trader subscribers for months that the problems would start when the debt ceiling was lifted.

Know what’s coming and what to to about it! Read Lee Adler’s Liquidity Trader risk free for 90 days! Satisfaction guaranteed or your money back.

90 day risk free trial offer is for first time subscribers only.

The post The Treasury Supply Drumbeat Has Begun was originally published at The Wall Street Examiner. Follow the money!





Long Term Stock Market Chart Perspective

Courtesy of Lee Adler

After a big day like yesterday, I like to get a little long term stock market chart perspective. (Yes, this stilted verbiage is for search engine optimization ????).

We do that with a monthly bar chart, which I update when relevant in Lee Adler’s Technical Trader. That’s in addition to the regular daily bar/cycle charts covering the past year, and a weekly cycle chart covering the past 4 years.

I wrote on July 14, in reference to the price and indicator patterns on the weekly chart:

The market has overshot a 3-4 year cycle projection in terms of both price and time. There are no long term projections. A 4 year cycle high is ideally due now. A 4 year cycle low is ideally due in mid 2020. That suggests a short, sharp bear market starting in the next few months and lasting until the second or third quarter of next year.

Prior to that, back on June 23, I wrote:

The market is now in a drive toward the top of the megaphone or broadening top pattern that has been forming since December 2017. That line is now at 3020. A sharp reversal from there would suggest that a major top formation is still in play.

That was my perspective in late June and mid July. Here we are some 4-7 weeks later. Did yesterday’s 85 point plunge in the S&P 500 mean anything in the big picture? Or was it just another case of racing easily across a thinned out trading range. Sound and fury signifying nothing?

Here’s that monthly bar chart that includes yesterday’s action. I’ll let you decide.

Long Term Stock Market Chart

Now, bear in mind that August isn’t over yet. It’s not where the S&P 500 is during the month that counts, it’s where we are on August 31, that matters. If the market fails to recover back above 2950, then the bears have it.

So from a long term stock market chart perspective (there’s that SEO keyword nonsense again), 2950 looks like the key this month. If we’re below that at the close on Friday, August 30, then the target would appear…
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Lee Tells Lindsay Williams – The Third Time’s The Charm To End The Bull

Courtesy of Lee Adler

Is it the end of a Bull Market? The S&P500 fell around 90 points. A precursor to something or is it just a moment in time?

Hear more of Lindsay Williams and guests at Strictly Business Podcast.

Correction: During the interview I said that the debt ceiling deal was awaiting Commisar Trump’s signature. He had already signed it last week. Issuance of new Treasury supply has already begun.

 

The post Lee Tells Lindsay Williams – The Third Time’s The Charm To End The Bull was originally published at The Wall Street Examiner. Follow the money!





Today’s Stock Market Chart Pattern and Outlook – The Shadow Knows

Courtesy of Lee Adler

Here’s today’s mid-day stock market chart outlook for the rest of the day.

This morning’s pullback stopped at 2908, where minor support was indicated on my intraday cycle chart.

Today's Stock Market Chart Pattern

If this little stutter step was the midpoint of the move, then we’re looking at 2892 as the target.

Note: This is an if-then statement. In  other words, I have no fucking clue where this move is going. At least at the moment, until the market gives us another signal.

Try Lee Adler’s Technical Trader risk free for 90 days! Follow the money. Find the profits!

The target could be 2900-2898 where minor support line s project currently. Or this could be it.  Or 2850. Or 2830. Remember, they usually go down faster than they go up.  

Today's Stock Market Support and Resisstance Levels

2919 is minor resistance. If cleared, look for 2929. If they fail to clear, put on your crash helmet.

If it gets there, I would guess that the PPT and the Fed will attempt to defend 2900.  Whether they’re able to do so successfully is the question.

The post Today’s Stock Market Chart Pattern and Outlook – The Shadow Knows was originally published at The Wall Street Examiner. Follow the money!





Treasury Offering Net Supply Bulges – The Deluge Begins

Courtesy of Lee Adler

The bulge in Treasury offering net supply issuance in the wake of the suspension of the debt ceiling, is starting.

Let the deluge begin.

Treasury Offering Net Supply

The US Treasury today announced $90 billion in 4 and 8 week bills to be auctioned Thursday. That includes $20 billion in net new supply to start raising the cash they need to repay the accounts they raided under the debt ceiling.

Commissar Trump signed the Rump Congressional deal to suspend the debt limit last week. Hundreds of billions in Treasury offering net new supply are coming within weeks. While that will eventually moderate some, the supply deluge will stretch as far as the mind can see, and beyond.

The new bills announced today settle August 13. Then $26 billion in net new coupon debt will settle August 15.

The pressure of new Treasury supply on the market will be relentless. We have known ever since the debt ceiling was imposed in March that this day would come and that it would be bad news for the stock market.

I analyze this trend 7 times monthly in Lee Adler’s Liquidity Trader. Start your 90 day risk free trial today!

The post Treasury Offering Net Supply Bulges – The Deluge Begins was originally published at The Wall Street Examiner. Follow the money!





 
 
 

Zero Hedge

Economic Confidence Drops To Lowest Since Shutdown As Dems Freak Out Over Imminent Recession

Courtesy of ZeroHedge View original post here.

Authored by Megan Brenan of Gallup

  • 49% in U.S. think a recession is at least fairly likely in the next year
  • Economic Confidence Index +17 in September, down from +24 in August
  • ...


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The Technical Traders

Precious Metals Setting Up Another Momentum Base/Bottom

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&rsqu...



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Phil's Favorites

Partisan divide creates different Americas, separate lives

 

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 &ldq...



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Kimble Charting Solutions

India About To Experience Major Strength? Possible Says Joe Friday

Courtesy of Chris Kimble

If one invested in the India ETF (INDA) back in January of 2012, your total 7-year return would be 24%. During the same time frame, the S&P 500 made 124%. The 7-year spread between the two is a large 100%!

Are things about to improve for the INDA ETF and could it be time for the relative weakness to change? Possible!

This chart looks at the INDA/SPX ratio since early 2012. The ratio continues to be in a major downtrend.

The ratio hit a 7-year low a few months ago and this week it kissed those lows again at (1). The ratio near weeks end is attempting to...



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Insider Scoop

10 Biggest Price Target Changes For Friday

Courtesy of Benzinga

  • Credit Suisse raised IHS Markit Ltd (NYSE: INFO) price target from $68 to $76. IHS Markit shares closed at $67.75 on Thursday.
  • Wedbush boosted Restoration Hardware Holdings, Inc (NYSE: RH) price target from $170 to $185. RH shares closed at $169.49 on Thursday.
  • Mizuho lifted Seagate Technology PLC (NASDAQ: STX) price target from $46 to $50. Seagate shares closed at $52.94 on Thursday.
  • UBS raised the price target for Weight Watchers Intern...


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Lee's Free Thinking

Federal Reserve Bank of New York Statement On Repurchase Operation - Roll Over Beethoven!

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 w...



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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 

...

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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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About Phil:

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...

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