Category: Fed, Central Bank and Banking Macro Liquidity

Withholding tax collections looked very strong for March, at first glance. But there was a one day anomaly in the data that skewed the monthly number hugely positive. It was the only day like that. When I adjusted that day to something consistent with the direction of the rest of the month, suddenly things didn’t look so hot. Non-subscribers, click here for access.

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That said, more revenue is more revenue, and for March at least, there was more revenue. That means less Treasury supply. Add that to the positive seasonality of tax collections adding cash to government coffers which in turn leads to massive paydowns of Treasury bills, and April and May still come out as cash cows for stocks and bonds. Non-subscribers, click here for access.

And that’s normally bullish, regardless of all of the market histrionics of the past week. Of course cash doesn’t guarantee a bull stampede, but it means that the gates are open for them to easily run through. Non-subscribers, click here for access.

As you know, this is only part of the big picture. It’s an important one though. This report tells, and shows, you what you need to know to understand what to do with your portfolio to protect yourself from what’s to come, and even profit from it.

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Or maybe it is. The Fed’s weekly real time balance sheet data and its slightly lagged data on the condition of the US banking system have begun to flash warning signs that the rally is on its last legs.  xxxxxxxxxx, Treasury supply conditions for the next 6 weeks will be favorable for xxxxxxxx xxxxxxx xxxxxxx. Non-subscribers, click here for access.

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Tax revenues in March and April create a cash bulge for the US Treasury. It normally uses that cash to pay down a couple hundred billion in T-bills in April and May. They plan to do so again this season. The money from paying off those T-bills will flow into investor accounts. Some of that money will be used to buy stocks and bonds. That should cause xxxxxx xxxxxx xxxxxxxx into mid to late May.

But we shouldn’t ignore the signs that this will be the xxxx xxxx xxxxx for this stage of the bull run. A bond market rally should also be another opportunity to xxxxx  fixed income.

Get the report now, for specifics.  Non-subscribers, click here for access.

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The Fed’s weekly real time balance sheet data and its slightly lagged data on the condition of the US banking system are inching closer to suggesting an end to the stock market rally. But they aren’t there yet. It could still take weeks or months.

It’s better not to attempt to anticipate. Money talks, and markets listen. Non-subscribers, click here for access.

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Markets also have the ability to create their own money. And that’s what’s been happening in this bull run. The Fed and its cohorts are not the drivers of this, as they were under the 12 year QE regime. Non-subscribers, click here for access.

As animal spirits take hold, eventually they turn into manias. And manias create their own liquidity through the magic of leveraged borrowing. As prices of stocks rise, a cycle of rising prices creates more collateral for borrowing, leading to higher prices, and so on.  Non-subscribers, click here for access.

Of course, manias ultimately lead to crashes. But they continue until they are exhausted. We look for signs of exhaustion both in the technical market data, which I report in the Technical Trader reports, and in the liquidity data that I report here. In this report, I show you exactly what the charts of the data are telling us to expect in the weeks and months ahead. If you know what’s coming, then you can formulate your own strategy and tactics accordingly. Non-subscribers, click here for access.

As I wrote last week, “The end may come quickly, so we need to be prepared and vigilant. Complacency is the trader’s enemy. We must guard against that…” Non-subscribers, click here for access.

Get the report now, for specifics.  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!”

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Withholding tax collections soared in February to their highest level in 13 months. If this is not just a flash in the pan or data anomaly, it could mean smaller than forecast deficits ahead. Smaller deficits translate to less than expected Treasury supply. But less than expected isn’t less in real terms. Supply will still be huge, and still a problem for the market to digest over the longer term. Non-subscribers, click here for access.

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But in the short run, the strongest revenue collection period of the year starts now. Corporate income taxes for last year are due on March 15, and both annual individual and quarterly individual and corporate income taxes are due April 15. Which is why, every year from mid March to late May, the annual revenue windfall leads to paydowns of Treasury bills. Non-subscribers, click here for access. 

Those paydowns put cash back into the pockets of the holders of the paid down T-bills. That cash figruratively burns holes in the pockets of those entities, mostly professional investors, who then use that cash to buy longer term fixed income paper and yes, stocks. That’s why we normally see a seasonal rally in the stock or bond market, or both, in the spring. The timing varies, but significant strength in April and May is the rule. Non-subscribers, click here for access. 

When the paydowns end and the government starts borrowing heavily again, the markets often sell off.  Non-subscribers, click here for access. 

So should we expect anything different this year?  Here’s the answer, and an explanation of why that is, and how to take advantage of it.  Non-subscribers, click here for access. 

Liquidity analysis gives us the context, or the map of the general direction where we can expect the markets to head over the next few months. That helps us to better understand the message of the technical charts.  Non-subscribers, click here for access. 

Meanwhile, the Fed’s RRP facility, which has been the source of much of the money contributing to the stock and bond market rallies, continues to be drained. However, the rate of withdrawals has slowed dramatically. As a result, the money in that pot looks likely to last longer than I originally expected, especially if T-bill paydowns increase on the strength of greater than expected revenues. This report also shows you exactly what that means for the markets.  Non-subscribers, click here for access. 

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In last week’s report, we noted that “One of the key measures of animal spirits versus liquidity has reached an historic level of insanity that could mark the end of this move. Or it could signal the beginning of even more craziness.” Non-subscribers, click here for access.

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The market’s verdict last week was “more craziness.” But the liquidity readings still are not cooperating. That craziness should end with a thud in the next couple of weeks. We’re already seeing the indigestion in the bond market. I think that that’s a sign of things to come, with worse news ahead for Treasuries and other fixed income. And then for stocks. Non-subscribers, click here for access.

The issue, as always is the timing. We’ve reached a stage in this market that the weekly banking data and real time weekly Fed balance sheet data is more important than ever. Therefore, I will go to a weekly follow up on this.  I’ll show you the charts, tell you what they mean, and we’ll formulate a plan for how to handle the tactical view from the TA.  Non-subscribers, click here for access.

This very well could be the week that was. One way or the other. This report shows what the key is, and what to 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! 

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!