QE4 begins next week

US equity indexes closed significantly higher, sp +32pts (1.1%) at 2970. Nasdaq comp' +1.3%. Dow +1.2%. The Transports settled +2.2%.

sp'daily5

VIX'daily3

Summary

US equities opened significantly higher, on increased hopes of a trade deal. The afternoon saw a closing hour high of 2992 (1pt below the late morning high), but then leaned distinctly weak, as initial details of 'phase one' of Trade-deal LITE, were released.

With equity strength, volatility was ground lower, settling -11.3% at 15.58. S/t outlook offers some cooling to the upper end of secondary downside gap to sp'2911.
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QE4 begins next week

On Tuesday, Powell alluded that the Fed was considering buying more US Govt' bonds. Today saw confirmation. Official press release: https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20191011a3.pdf


QE4 begins Wednesday Oct'16th...

see: https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/treasury-securities/treasury-securities-operational-details#current-schedule
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I would especially note...

The Fed sure doesn't want to call it QE, and instead deem it as 'Reserve Management Purchases'.

Lets be clear, QE4 begins next Wednesday morning, with a starting annualised rate of $720bn.


Earlier and larger than expected

I had expected at least another two rate cuts, with QE4 launching as early as late Spring 2020. Instead, the printing will resume next week, with the Fed starting pretty big at $60bn a month. I have to think that behind the scenes, the monetary masters of print central are absolutely terrified of even a mild recession.

Whilst lower rates are not going to help stave off a recession, I'm not sure if $60bn will be enough to juice the market above the next decisive level of sp'3050. As ever, how the month settles will be telling.

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Vulnerable market

US equity indexes closed moderately higher, sp +18pts (0.6%) at 2938. The Nasdaq comp' and Dow both settled +0.6%. The Transports settled +1.2%.

sp'daily5

VIX'daily3

Summary

US equities opened a little choppy, but jumped higher on....

Equities built significant gains into the early afternoon to sp'2948, with a little cooling to settle at 2938. Volatility cooled for a second day, with the VIX settling -5.7% at 17.57.


Vulnerable market

Whilst we've now seen two days of gains, the market does look vulnerable into the weekend. The s/t outlook threatens an ugly end to the week. Clearly, that will be largely dependent on how the US/China trade talks end. Yours truly would hear alarm bells if the VIX settles the week above the key 20 threshold.
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Descending into the land of BREXIT chaos

A fine autumnal evening

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We shall call it...

US equity indexes closed broadly higher, sp +26pts (0.9%) at 2919. Nasdaq comp' +1.0%. Dow +0.7%. The Transports settled +1.2%. Near term outlook offers another swing lower ahead of the weekend.

sp'daily5

VIX'daily3

Summary

US equities opened broadly higher on yet another China trade related headline. Whilst the gains were a little shaky, the market did manage to claw to 2929 in the closing hour... only to see yet another trade headline knock the market to settle at 2919.

It wouldn't be a normal trading day without...

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Volatility was in melt mode, with the VIX settling -8.1% at 18.64. S/t outlook offers another significant wave lower in equities to challenge last week's spike floor of sp'2855. If the VIX settles the week above the key 20 threshold, I would look for the 2810/2790 zone with VIX printing >30 next Mon/Tuesday.
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We shall call it...

As the fed are set to spin up the printers again, what do we call it?

Powell is repeatedly saying "This is not QE". By definition, that merits as outright crazy talk. An increase in the balance sheet - literally printing money out of nothing, and then buying something (whether T-bonds or whatever) is QE.

The FOMC of Oct'30th will provide rate cut'3, but also renewed QE of around $15bn a month. It appears that will be used to buy US Govt' bonds.

After some thought... I will call it... QE4 Phase'1

We know where this is headed, right?

Phase'1 $15bn
Phase'2 $40/50bn (by end 2020)
Phase'3 $90/100bn (2021/22)

QE4 will be without end, and in addition to US Govt' T-bonds, we can expect eventual purchases of anything and everything, including corp' bonds, stock/bond ETFs, student debt, property (both business and residential), and infrastructure bonds. The only thing that isn't currently on the menu is the direct purchase of people. 

To quote Dr Strange... "... we're in the Endgame now", although perhaps the following is more appropriate...



Yours, tempted to call it... 'mini QE'
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A chilly autumn day in the capital of geo-political chaos

Full moon is Sunday Oct'13th

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