After years of following and reporting certain banking indicators for hints about how liquidity is impacting the system, and vice versa, that’s the question I’m now asking myself.
Well, there is an answer. And you need to know it! For your financial health, and for your sanity.
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There’s evidence that gold has shifted into trending mode, so I’ve added a few more mining picks to swing.
Following the crowd would have made you the most money. But now what?
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There will be a severe shortage of QE next week to match up with the end of month Treasury issuance. Bears have a shot there, but here’s why things tilt back toward the bulls after that.
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The Fed’s balance sheet resumed its growth in August after a bit of a stall in July when dealers paid off Fed repos. That program has been at zero since then. Dealers don’t need to borrow from the Fed when the Fed is cashing them out every week with QE.
And there’s the rub for bears. There’s still enough QE to keep this farce going, short term factors notwithstanding.
Last week was MBS settlement week (see last week’s QE update). That pumped $100 billion into dealer accounts. Not all of that showed up on the Fed’s balance sheet total assets because other assets were paid down in the. MBS get paid off in the normal course of business during the month. Some of the Fed’s superfluous alphabet soup programs have also had reductions.
But that stuff doesn’t really matter to the stock and bond markets.
Our focus is on the Fed’s securities holdings, in what’s called the System Open Market Account (SOMA). That’s where the action shows up. It’s the money that the Fed pumps into the financial markets through its straw men, the Primary Dealers. And that is still steadily growing.
Here’s what that means for the outlook and strategy.
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The correction looks benign so far. The 10-12 month cycle projection has risen despite signs of top formation. I have added a couple of mining picks.
A short term top and minor correction are due but intermediate cycles still point higher. We have more stockchart picks to take advantage either way.
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The forecast has changed. It’s less bearish, but it’s still bearish. Here’s why.
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The correction has begun. Here’s what to expect.
The longer intermediate cycles say that the market is heading much higher. Shorter cycles point to more limited upside. But the whole shebang is fragile as hell. Here’s what to look for, along with some interesting chart picks on both the long and short side.
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Lee Adler