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Friday, March 2, 2018

Daily update 3/2 Fed’s QE Unwind Marches Forward Relentlessly


The market opened down, but rallied through the day.  There was decent volume.  Breadth ended up at +59%.  New highs were low again at 26.  New lows stayed very high at 159.

The futures tested yesterday's low this morning and rebounded.  They ended the day back inside the channel and above the 2/22 overnight low.

The green count crossed back above the red line.  I call this a bounce cross for lack of spending time to think of a better name.  This will often lead to further upside.

The VIX hit a high over 26 this morning, but imploded during the day down to 19.5 at the close.  A move like that will usually be followed by more upside.  That adds some credibility to the bounce cross in the red/green count chart.  The last three days look like a mini capitulation low with the increasing volume each day.  I would have preferred to see higher TRIN readings though.  True capitulation usually has more of a panic selling look.  It looks like a good probability of a short term low and decent bounce.

This market is starting to act like it did in mid 2000.  There were a lot of changes of direction without warning.  The good thing was the moves were big enough to trade if you were nimble.  I think the days of relentless up are over for the time being.  If you can't be nimble be very careful or sit on the sidelines.  We have morphed from an investors market to a traders market.  It could last quite some time with all the things going on. 

I have seen claims the FED isn't following through on QT.  Here is a good look at the data.  Fed’s QE Unwind Marches Forward Relentlessly

There are a couple of good charts in there.  I found these comments very interesting.  The highlight is mine.

There have been suggestions that the Fed “backed off” or “reversed” the QE-Unwind during the recent sell-off to prop up the markets. This was deducted from a single bounce in the overall balance sheet in week ending February 14. But this bounce was just part of the typical ups and downs and perfectly within range.

I have to disappoint these folks: based on what has happened in February with the Fed’s Treasury securities and MBS – the only two accounts that matter for the QE Unwind: The Fed didn’t miss a beat. The QE-Unwind proceeded as planned throughout the sell-off. And I expect this to continue.
This Fed isn’t going to try to bail out every whiner on Wall Street. It has been clear about that. It won’t take Wall-Street whining seriously until credit starts freezing up – and the credit markets are far away from that.

Very similar to my statement that the Powell FED put is much lower then the Yellen put was.  This is a much different FED now.

For those affected by the north east storm.

Have a great weekend.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.