The FED's Balance Sheet normalization plan is what the rally is based on...
Bad global market, no problem??
Be prepare, look around, talk to strangers.. The cards are about to fall because the average joe also see's the slowing..
So while the Fed's are to disconnected to make a real change they just just hold the balance sheet runoff to a drip so the naive can catch their breath and let them catch the falling knife!!!
Word, so position yourself for the downside risk. Move with the market, up and down..
Thanks for your info. Are there some historical cases about Fed's QE Dump and the stock market's reaction?
Marcus2018
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@dragonus, Lots.The last is this current rally on the ease of runoff for the month of Jauary. The Oct 3rd $19 billion was the largest maturity without reinvesting and you see the markets started it fall from 2920 and $31 billion on Oct 31st that push the SPX to 2350 area. In 2013 when the FED announced that they were reducing the QE by $85 billion the Taper Tantrum happened, the SPX fell by 7.5%. That reaction alone is why the schedule is public for all to see when all will be left to mature and not reinvested. So that react gave us all a heads up, so to speak, they can ease but off on some dates but all are listed. Stay tuned
dragonus
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@Marcus2018, Very good examples and nice to learn from you. Thank you for teaching. I'll keep following you for sure.
luisella
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SPX close on 24 Dec 2018 was 2351.10 and rose to close 2510.03 on 2 Jan 2019.
That was a rise of 185.93 points. So, 158.93 X 1.62 = 257.46 fib extension.
Close on 3 Jan 2019 was 2447.89 plus 257.47 = 2705.35 target @ 62%.
Today's close is 2632.90, so 72.45 points left to move to 2705.35 or 62%.
The highs might end up higher at 2724.00 as the wrong side options buyer buy.
To my mind, no lower close than previous day's low in SPX took place yet.
The SPY did close lower than the previous day's low, a mere warning!
We can even go to the 78% fib. I wait for the index to produce the sign!
The sign will be a lower close than previous days close after either 62% or 78% retrace
Expecting this to occur end of the week. Maybe early next week.
amazing chart. actually shocking. are you saying that we are like canaries in a coal mine ? and were in the heck did pulled all that amazing information ? APPRECIATED FOR THIS WORK !
Marcus2018
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@LoLBeach, Ha. In 2017 it was published that mid quarter months 2018 and mid quarter 2019. And $2.4 trillion of the balance sheet by 2020. So the 4 to 6 year normalization plan will be shoved down the economies throat within two years of the runoff that started int fall of 2017.
So what took from Nov 2008 thru Oct 2014 in QE will be forced back in the market to destroy it mostly in the first two years. So the $4.5 trillion ($2 trillion in Treasuries & $1.8 of Agency or MBS debt) on the FED balance sheet at the end of 2014 will be runoff in the market faster than they acquired it. Unless someone reads this and reacts.HA
So at this pace by summer the 50% retracement in the balance sheet should be met and flatten through the remainder of the planned mid 2019 unraveling. Then in 2021 fall it will again stop another round of unraveling just in time for the markets to get over what is about to happen.
CodedFlow
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@Marcus2018, SPX has a bearish RSI divergence in front of a Ishikaa cloud. I think the markets know... only question i guess ... if someone will do something about this cute shove. I am still shocked. Appreciated for the amazing work.
CodedFlow
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@Marcus2018, amazing sense of humour as well... the shxx award for DaX made my day...