Wednesday 16 October 2019

Within the Twilight Zone

US equity indexes closed mostly weak, sp -6pts (0.2%) at 2989. Nasdaq comp' -0.3%. Dow -0.1%. The Transports settled +0.4%. Near term outlook offers some cooling into and at least a little beyond OPEX.




US equities opened a little choppy, leaning on the weaker side.


Its always 'curious' to see the 1929 crash highlighted, not least by a world leader.

The afternoon saw further equity chop, leaning on the weaker side. Volatility picked up, (if only fractionally), with the VIX settling +1.0% at 13.68.

Within the Twilight Zone

We have been living within the twilight zone for many years, with today seeing the start of QE4.

SPX, monthly'8

Today saw the Fed create around $7bn of new money out of nowhere, and use it to buy US T-bonds from the primary dealers. Some of that institutional money in bonds, will now make its way into equities, or a few lesser areas (commodities, VC, even forex).

QE4 will initially run at $60bn a month, which makes for an annualised $720bn.
See 'Treasury securities' schedule

The gross irony is that Powell is very clear in stating 'This is not QE'. Instead, he deems it 'Reserve management purchases'.

Lets be clear...

A reduction in the balance sheet = Quantitative Tightening (QT)
An increase in the balance sheet = Quantitative Easing (QE)

The balance sheet is now rapidly increasing once more.

Anyone who doesn't call it QE4 is either just plain lying, in denial, or 'in bed with the fed', as most of the financial media appear. Ohh, and you can be sure the $60bn number will be increased, probably by the early spring.

There have been many intros to the show, but this is perhaps the finest...

Yours... 80s child

Early evening in the London metropolis

The Twilight Zone

Extra charts in AH (usually around 5pm EDT) @

Goodnight from London
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