The combination of market sentiment that has gone insane and the coming deluge of Treasury supply have rendered the financial markets increasingly fragile. At the same time, that does not rule out continuation of the rally. Non-subscribers, click here for access.
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Survival of the bullish trend in stocks will depend on the willingness of dealers, hedge funds, and institutions to continue to increase leverage in order to support rising prices. They could use the coming crush of T-bill supply as collateral for new borrowing to buy stocks and bonds.
Or they may decide not to.
I know of no way to forecast when the willingness to constantly increase leverage to support the bull market will end. Nor do I think it necessary to do so. Normally we can see the signs of reversal via technical analysis applied not just to stock prices, but also to the liquidity measures that we track here. When the tide begins to go out, we should see the signs of it in both, in time to take the appropriate actions. As of now, we see xxxxxxxx xxxxxxx xxxxxx xxxxxxx.
In the meantime, we must keep our radar up and running.
Here are the charts and analysis that show you how to view this and when to be ready to move. Non-subscribers, click here for access.
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