Permabear Doomster

Thursday, 17 October 2019

Chess pieces on the move

US equity indexes closed a little higher, sp +8pts (0.3%) at 2997. Nasdaq comp' +0.4%. Transports settled +0.6%. Near term outlook offers opex-chop.

sp'daily5

VIX'daily3

Summary

US equities opened moderately higher, with the SPX seeing an early high of 3008. From there, price action was choppy, and leaned on the slightly weaker side. Volatility remained subdued, with the VIX settling +0.8% at 13.79.

Chess pieces on the move

This morning, it felt like a great many pieces on the chess board were moving around. First we had Johnson and Juncker touting a provisional BREXIT agreement...

Then the Kudlow was wheeled out, across two CNBC shows...

Larry is optimistic about the rest of Q4 and across 2020. This is the same guy who didn't see any problems as late as summer 2008, a mere 7/8 weeks before Lehman imploded.

Early morning also saw a rather powerful reversal in the precious metals and related miners. Though not always, they are often an early warning of underlying problems.

This weekend will see the UK Parliament sit on Saturday for a debate and perhaps some number of votes. Its exceptionally unusual, having last happened in 1982 during the Falklands conflict.
Whilst Friday-opex will lean to chop around psy'3K, next week looks very problematic.
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Extra charts in AH (usually around 5pm EDT) @ https://twitter.com/permabear_uk

Goodnight from London
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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.

sp'daily5

VIX'daily3

Summary

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

Meanwhile....

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

Yours... 80s child
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Early evening in the London metropolis

The Twilight Zone

Tuesday, 15 October 2019

Climbing with earnings

US equity indexes closed significantly higher, sp +29pts (1.0%) at 2995. Nasdaq comp' +1.2%. Dow +0.9%. The Transports settled +1.3%.

sp'daily5

VIX'daily3

Summary

US equities opened moderately higher, and built significant gains, as the first batch of Q3 earnings came in broadly fine.

Volatility was in melt mode, the VIX settling -7.1% at 13.54. The s/t cyclical setup favours the bears for Wed/Thurs'. It is notable that Wednesday will see QE4 begin, and that is no small matter.
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