Here’s the breakdown from Treasury. I pulled the 2019 report because they show past quarters. Would still have to cross this with QT efforts during that time.
https://home.treasury.gov/system/files/136/SourcesUsesJuly2019Public07-29-19.pdf
1 Like
@juangomez053 keeps the golden nuggets coming on TF. To add to the story about the Treasury selling less bonds, it appears there is an unexpected windfall in tax revenue this year which is adding to the government coffers. Goes to the theory that QT illiquidity is being neutralized by less treasury borrowing.
https://twitter.com/lisaabramowicz1/status/1521843675227213824?s=21&t=RLXi6R1AMN2YnqEh0nfuLw
2 Likes
ISM PMI wasn’t great today, heres a visual breakdown:
https://twitter.com/kathyjones/status/1521865038901907456?s=21&t=irVk0fQnCm_tBaCePdnA_Q
1 Like
Well fomc rate came in as expected, with that said, J Pow’s tone was more dovish than I think most were anticipating. Essentially taking 75bps future hike off of the table and reassuring the markets that the economy is strong and resilient.
IMO the fed chose today to stay behind the curve.
Today feels alot like March FOMC. Similar story but more people paying attention to it. After the March meeting and press conference, SPY showed strong gains for about a week and a half.
I traded my strategy today, made the right trades but had a number of poorly executed SL’s eat up my potential gains due to those wild swings. In the future im going to let the dust clear a bit before making entries. Ended the day down 5%, decided to take the L and move on. 100% cash at the moment.
My plan is to be respectful of this rally and wait for a clear reversal signal. Going to trade the trend lightly as I still believe there is significant uncertainty in the global financial markets that could enter the chat at any time.
Looks like the bulls are in charge, at least for now.
Hope everyone had a great day
6 Likes
Next week’s CPI and PPI data releases should be interesting to watch as well, on May 11 and May 12 respectively.
The previous PPI was hotter than expected, which statistically implies a hotter next CPI, as in the report we will see next week.
5 Likes
Neat thread by Alf on the fed
3 Likes
Perhaps Alf is being too harsh here.
I thought JPow was pretty clear that there would be a few 0.50 rate hikes followed by 0.25 ones. 0.75 is off the table, unless something crazy happens.
Sure, 2Y bond yields went down ~0.15% as a result, but we probably have to wait a few days to see if this is the start of a trend. And if it seems like it is one… they’ll just send Bullard out again, spitting fire and brimstone.
As long as the Fed stays this course they had laid out before, the markets should stay somewhat depressed. So there doesn’t seem to be a reason to double down on the negative rhetoric, especially if they don’t mean to follow through with it.
The Fed realized a while back that they could adjust financial situations using their words as much as by their actions. Hence, the good-cop bad-copping routine with words as much as they are tweaking the interest rates.
They also probably don’t feel like overdoing the bad cop routine as there are perils to hiking too fast - credit markets can choke. Then we’ll have a real problem on our hands. Yields rising too fast can also cause Japanese and European investors to pile in on the carry trade, effectively nullifying the move.
What can change this in the near term is, as you note, the CPI print and perhaps the PPI print. If April CPI is about the same level or below March, the Fed can stay the course. If it is higher again, then the Fed will have to crank up the tough talk again.
4 Likes
Haven’t liked the movement SPY has been performing for the last three days. Along with the news, it appears the volatility in the overall Market makes it difficult to ensure that inflation can be curved in a timeframe that is soon- which can mean we’re bound to see these $40 moves on SPY for another month.
With the movement we saw today, we’d now be in the middle-ground. It’d be a very bad sign if tomorrow sees all those gains disappear, which still is in the realm of possibility. Definitely taking things day by day right now…
5 Likes
Elon Musk saving the markets with his $11b tax bill lol
5 Likes
I personally am not quite sold on bull rally until inflation is in check. However the one thing the market always responds well to is certainty. And flat out stating no .75 hike I think is what made everyone FOMO last hour.
However one aspect to think of for the remainder of the year is it is a midterm election year. No matter what side you are on. The number 1 concern for voters year after year is the economy. I don’t see anyway the White House or the fed blow rates through the roof and tank market or economy in turn. At very least til after November.
5 Likes
Saying no 75bps hike definitely helped, but mixed with Powell’s statement that inflation “looks like it has peaked” (CPI comes out soon curious to see if we get a lower MoM print) plus saying some 25 bps hikes coming this year, all else equal, is the whole image as to why the market rallied. Is it a bear market rally? Find out next time on Dragon Ball Z
5 Likes
I do not see inflation getting under control with only 50bp hikes. Too many boomers done working and entrenched supply chain issues. I understand why JPow said no to 75s today, trying to land things softly by spreading out the pain, but I believe he will speak more and more in favor of it in the near future. Then we see SPY go down. But I’m enjoying the gains today and in the very near term.
5 Likes
Agreed. Something telling today was gold and oil also seemed to continue their uptrend. This shows to me there’s significant money still flowing into commodities and dont have confidence in equities.
+1 to your statement about enjoying the ride up, but I don’t see clear skies unless CPI data says otherwise.
5 Likes
Seems like the markets digested the certainty/credibility of the Fed in that the next few months we’re seeing 50bps increases coupled with $47.5B/month QT. Some things to take from JPow:
-
Someone asked what it would take to ease policy and he said one month of data is not enough for them to change course. Inflation is sticky at this point, even though peak may have been reached. So unless the economy tanks or inflation takes a significant dump, this is the policy for the next couple of months.
-
He admitted that this type of QT is unprecedented and they don’t know how it’s going to effect the economy (and we can infer the markets).
So analysts have now priced in the Fed’s policy and they’ve restored their credibility but it doesn’t mean that the Fed has got the right strategy to tackle inflation or to prevent a hard landing. Only seeing how the next few months play out against the Fed’s playbook will tell us that. I’m much more interested in what QT’s impact will be because it’s such an unknown.
5 Likes
This is an excellent take. Ive been thinking about this disconnect between “pricing in” the anticipated monetary policy changes, and “pricing in” the actual impacts those changes have on the economy.
So the market knows what the fed is doing and is reacting with some level of certainty, but is the market reacting to the uncertainty that those descisions bring?
We legitimately dont know what the outcome will be because we have never been here before, not just the fed raising rates with qt, but nearly every central bank on earth is tightening at the same time as this inflation is a global problem. And with signals of slowdown in GDP, labor, housing, discretionary income, consumer sentiment I think it is possible the fed is just trying to get out of the way so they aren’t seen as the catalyst for the decline.
Thanks as usual for sharing !
4 Likes
Quick update,
Everyone knows what happened today, but few including myself saw it playing out the way it did. Seems to be the theme lately, even if you get the direction right, the swings and massive advances and declines make this current market challenging but brings with it significant trading opportunities.
This is why I want to mention something that has been working quite well for me. It has been mentioned by so many people in this community, I started doing it more based on @nano sharing his views on it.
Now I want to preface by saying I have been taking much shorter positions lately, until I joined Valhalla, I was 100% swing trading, always leaning on the bull side. And for the last few years, that has been good to me. But markets change. This is a bear market, and with that comes violent bear market rallies and singnificant swings, sometimes intraday.
For scalping and shorter length positions starting the day with the majority of your port in cash has been working well for me. It sounds simple, but does require some discipline. I have been opting for this strategy just due to these big swings.
Pre market and post market have never been a strong indicator, but most especially now, the damn things swing all over the place and very rarely predict what direction we are going. This is why cash makes more sense for me, and as Ive learned again from this community, waiting 15, 30, 60 min or longer to wait for a direction is a strong game plan, while also letting IV cool off.
Then at night like today ill go 90%-100% cash and see what tomorrow brings.
I had a great trading day, one of my most memorable for sure. Hit the ground running and played it for most of the day. Interesting enough I only played spy puts. I didnt even realize how hard my favorite shit list tickers were dumping. PTON, ARKK, CCL. Oops.
Spy puts did well, cut cost basis early, cut 1/2 of profit when it felt right and let the rest ride until we hit profit areas or strong support then snag the next ATM strike down. I think at one point I had every strike from 423 to 417, it was madness but they were all ITM and I had already taken profit on all of them. Port ended the day at
+38%, could of been much more had I not cut some early, but im quite okay with that.
Looking forward, I would agree with @swoleappa’s latest update leading up to next weeks CPI report, also pay attention to those pesky fed members speaches as we know markets react. Ill be starting the day mainly cash, going to trade indexes both directions. Heavier on the bear side meaning position size on bear days will be larger. Going to pay more attention to my shit list, commodities are starting to look interesting again, and look at some server plays.
Im keeping my eye on 405 for key support, I think we gap down pretty heavy after that. With that said, until CPI next week its hard to say. Seems like everyone is paying attention to the relationship between CPI, fed policy, and equities price movement now, so excpect the big moves to continue.
11 Likes
Interesting point from the ETSY earnings report. As we have been expecting the ‘typical strong American consumer’ may not be as strong as the Fed imagines.
We are emerging from an unprecedented time. And within that, Etsy had unprecedented growth. We expect that this year is going to be unpredictable for us. There are certainly many moving parts both tailwinds and headwinds, which are difficult to forecast. People continue to be nervous about global events and the economy, and we’ll have to fight harder for consumers’ time and money. Yet we have ample reason to remain optimistic.
During the first quarter of 2022, Etsy marketplace GMS declined 2% year-over-year and increased 177% on a year-over-3-year basis. That is when compared to the first quarter of 2019. The deceleration we started to experience in February 2022 worsened throughout the quarter, which we attribute to headwinds related to increased reopenings, high levels of inflation weighing on consumer purchasing power and consumer mind share loss due to the crisis in Ukraine and its reverberations throughout the global economy.
5 Likes
Money too much, borrow too easy. Not enough stuff, stuff now high price.
Must make stuff not so high price. Must make money hard to borrow.
Money hard to borrow, hard to run business, business get less money. Less employees, less spending, less economy.
Soft landing win win, hard landing bad bad.
What happen, nobody know.
3 Likes
We are drawing down on savings and raking up the credit like there is no tomorrow though. Not what would help inflation go down =/
(Source)
6 Likes
Ton of quantitative info in this great thread, but here’s a qualitative point to suggest we’re nowhere close to the bottom. I was watching NBA playoff highlights on youtube when this furu vid popped up in between all the basketball vids.
We won’t be anywhere the bottom until these kinds of videos aren’t getting 80k+ views in less than a week.
3 Likes