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Category: Fed, Central Bank and Banking Macro Liquidity

Analysis of the major forces of macro liquidity that drive markets. Click here to subscribe. 90 day risk free trial!

Liquidity Now Hinges on Mood

Lee Adler

DVP (Delivery versus payment) Repo, which is the bulk of the repo market, made a new high last week, supporting a bullish trend in stocks. The players continue to be ready and willing to use repo to acquire and finance holding Treasury inventory. Non-subscribers, click here for access. 

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Coupon issuance at mid-month was light which eased the burden on the markets. At the same time, the Treasury has issued a tsunami of T-bills in July and August. That turns into repo. That is insta-money. T-bill issuance is effectively money printing as long as the players are willing to repo the T-bills. If they were not, they would need to liquidate assets to buy the new T-bills. They’d rather hold their stocks and bonds, and use repo to buy the bills. It’s cheap financing for their holdings of long-term financial assets. Non-subscribers, click here for access.

In view of this process, here’s an illustrated look ahead at what to expect to signal a final top in stock prices. See for yourself, understand, and decide based on these specific triggers. Non-subscribers, click here for access.

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Bits and Pieces- Why What Was Bearish is Now Bullish

Lee Adler

Whereas, in the course of human events… Non-subscribers, click here for access. 

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Wait! Who starts a report with “Whereas!” I do! Whereas I’ve been summer vacation mode, traveling, I’m a bit behind on updated the Treasury supply and banking data. So I’ll reduce this to bite sized pieces for more current consumption over the next two days. First let’s start with Treasury supply. The Treasury and TBAC just released their latest 6-month supply estimates on July 31. Non-subscribers, click here for access. 

In following reports, I’ll get to the Fed balance sheet data, which is released on Thursday evening, and then the banking data, released Friday evening. Non-subscribers, click here for access. 

Repo use surged last week in a massive breakout. Clearly, the players have decided that they are ready and willing to use repo to acquire and finance Treasury inventory. Coupon issuance for the August 15 mid-month refunding is light, but the Treasury has issued a tsunami of T-bills in July and August. Heavy coupon supply is due at month end. Then T-bill paydowns are coming in September as usual, thanks to the mid month estimated tax payment windfall. Non-subscribers, click here for access. 

Meanwhile, T-bill issuance has been massive in July and August. Back in the old days, I thought that T-bill issuance was bearish because buyers needed to liquidate existing assets to purchase them. That used to work, but now it is wrong, as we recognized when T-bill issuance surged in June. Here’s why, what it means for the market, and how to play it as a result. Non-subscribers, click here for access. 

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Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

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Tax Collections Were Worse than the Jobs Report But…

Lee Adler

After a strong June, tax collections weakened in July. Do they suggest that the widely feared recession may already have begun, or that maybe it’s just a normal correction?  Here’s the answer, as always with the proprietary graphs that you can’t get anywhere else that show you why.   Non-subscribers, click here for the rest of the story.

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Why Primary Dealers Net Short Fixed Income Is Now Bad News for Stocks

Lee Adler

Primary Dealers remain net short the bond market, considering both their securities portfolios and futures hedges. That’s a problem, considering not only what’s going on right now, but what has been going on for the past 3 months. Non-subscribers, click here for access.

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Here’s what this means for stocks and bonds, and what you should do about it.  Non-subscribers, click here for access.

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End Stage Hysteria Breaks

Lee Adler

Last week we saw that the price to liquidity ratio measures suggested that the rally was in its end stage. The most recent data gives additional support to that idea, with those indicators touching upper trend limits in the week ended July 17. Under the circumstances, market action this week looks like not just a pullback, but more likely, xxxx xxxx xxxxxxxx xxxxxxx xxxxxxx.  Non-subscribers, click here for access. 

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As a result, my focus would be on xxxxxxxxxxxx   xxxxxxxxxx xxxxxxxxxx. Non-subscribers, click here for access. 

The bond market has rallied in July, contrary to my thinking that massive supply would hurt the bond market. The source of the money to support this isn’t clear, but deduction would say that it’s leverage, particularly repo. But repo outstanding has been rangebound. If it subsequently breaks down, that should be a sign xxxxxxxxx xxxxxxxxx xxxxxxxxxxx again. Short-term bills continue to look like xxxxxxxxxxxxx xxxxxxxx xxxxxxxxx Non-subscribers, click here for access. 

This report shows and explains the critical indicators that you need to follow to stay on top of the market as it tops out. Non-subscribers, click here for access.

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KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

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The Sky’s the Limit

Lee Adler

The only thing keeping the market afloat is the willingness of big market participants to take on leverage to continue buying stocks and bonds. Increasingly prodigious amounts of T-bill supply are not pressuring prices as I had forecast back in ancient times, maybe 3 months ago, that they would and should have. Instead, they have become the basis for taking on more debt via repo and margin, and using it to buy other assets such as Treasuries and stocks. Non-subscribers, click here for access. 

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As a result, I have been suggesting to hold on to longs for the time being, and hold off on shorting. However, the market’s pricing is now so extended versus base liquidity, aka money, that we have to wonder where the limit is? Is it here, or is it the sky? Non-subscribers, click here for access. 

The trend is still in place and there’s no indication yet that it is beginning to turn. On the other hand, there are indications that price to liquidity ratios are at or near extreme trend limits. They’ve been at other apparent limits before and gone through them, as the movement increasingly moves toward the vertical. They’re so vertical now that it looks “end-stagey” to me, but that’s just a gut reaction born of 56 years of observing markets, not an empirical judgment. We need more. Non-subscribers, click here for access. 

It will come down when the weight of higher prices becomes too much to absorb. All we can do is closely watch the price measures via technical analysis, and apply basic TA to price/liquidity sentiment measures, looking for the first signs of a change of direction. Given the fragility of the current structure, I suspect that the turn could be faster than usual. I would want to react quickly at the first sign of a turn. In other words, sell first and ask questions later. Non-subscribers, click here for access. 

This report shows and explains the critical indicators that you need to follow to stay on top of the market as it tops out. Non-subscribers, click here for access. 

 

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KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

THANK YOU FOR YOUR SUPPORT!

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Picking Up Nickels in Front of a Steamroller

Lee Adler

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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KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

THANK YOU FOR YOUR SUPPORT!

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Tax Collections Post Strong Gain in June

Lee Adler

Withholding tax collections were strong in June. The US economy shows no sign of slowing. More importantly, strong revenue growth has restrained the growth of Treasury supply. Consequently, the US Treasury was able to continue T-bill paydowns through June, reducing the negative impact of heavy coupon issuance. Non-subscribers, click here for the rest of the story.

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We were able to use the data to foresee that, and the fact that the impact would be bullish. We also knew that the paydowns would end in July and that the resumption of T-bill issuance that would result in renewed withdrawals from the Fed’s RRP facility. That’s because money managers would switch from holding Fed RRPs back to holding T-bills as they were issued. The decline in the RRP fund would resume. Non-subscribers, click here for the rest of the story.

Given where I expected the RRPs outstanding to be at the end of June, last month I guessed that the facility would run dry in November or December. But the RRPs never got as high as I expected as money managers took some of the cash from the T-bill redemptions and used it to buy stocks and bonds instead of depositing it in the RRP facility. Non-subscribers, click here for the rest of the story.

Now bill supply is starting off July at a gargantuan level. Putting 2 and 2 together suggests that the RRP slush fund will run dry in October, even at the current revenue growth rate. Non-subscribers, click here for the rest of the story.

Here’s the illustrated story of how we got here, and what it means for your trading and investment strategy. Non-subscribers, click here for the rest of the story.

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KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

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Liquidity Shows It’s Time to Get Out

Lee Adler

Macro liquidity is drying up, according to the banking indicators and other monetary data that we follow. It’s not just one thing. It’s everything. Money growth has stopped in its tracks everywhere we look. Some indicators are breaking down. Non-subscribers, click here for access. 

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Macro liquidity is drying up, according to the banking indicators and other monetary data that we follow. It’s not just one thing. It’s everything. Money growth has stopped in its tracks everywhere we look. Some indicators are breaking down.  Non-subscribers, click here for access. 

Falling money supply is not bullish. Even flat money supply growth that we’ve seen for months should be bearish. In fact, if we look beneath the surface of the rally in the big cap market averages, most stocks are not participating in the big cap bull trend. I’ve covered that aspect of the market in the Technical Trader reports. Here the focus is solely on liquidity, and that is turning from yellow flags to red flags.  Non-subscribers, click here for access. 

In recent reports I had been recommending that longs could still be held. I now recommend… Non-subscribers, click here for access. 

Here are the charts and analysis that show you why. Non-subscribers, click here for access. 

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

THANK YOU FOR YOUR SUPPORT!

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For Primary Dealers Easy Street is No More

Lee Adler

Primary Dealers have reduced their fixed income portfolio hedging at the worst possible time. They are facing a deluge of supply in the months ahead, and they are not well hedged. They have reduced leverage a bit, but this doesn’t appear to be enough to help them through the supply tsunami that is headed their way. Non-subscribers, click here for access.

Subscribers, click here to download the report.

Here’s what this means for stocks and bonds, and what you should do about it.  Non-subscribers, click here for access.

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

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