The Market 2022-2023-2024

[dscher]

It "should" be priced in. I think we'll see swings based on what Powell actually says like previous meetings.

Nothing will be certain this go round. Up will be lead by down and vice versa. This is a traders market this week. If you know Vol you'll be just fine. If not, stay the eff out. Lol.

 

[Folster]

Nothing will be certain this go round. Up will be lead by down and vice versa. This is a traders market this week. If you know Vol you'll be just fine. If not, stay the eff out. Lol.

This is interesting. I overlayed the Fed Funds effective rate on the 2YR Treasury Yield. I don't see a past example of the Fed bluffing or the bond investors being wrong. Maybe 94.

You must be registered for see images attach

 

[dscher]

This is interesting. I overlayed the Fed Funds effective rate on the 2YR Treasury Yield. I don't see a past example of the Fed bluffing or the bond investors being wrong. Maybe 94.

You must be registered for see images attach

Note the divergence though this time. It's significant.

 

[Folster]

Note the divergence though this time. It's significant.

84 and 94 are pretty comparable in the moment if you don't have the luxury of seeing how it played out.

 

[dscher]

84 and 94 are pretty comparable in the moment if you don't have the luxury of seeing how it played out.

Fair. But factor in the parabolic spike you've seen from the 2 year at the present moment. What does that tell you they have to do with the funds rate?

 

[Folster]

Fair. But factor in the parabolic spike you've seen from the 2 year at the present moment. What does that tell you they have to do with the funds rate?

You could surmise, the Fed has been too slow and bond investors have know what needs and is going to happen well before the Fed finally acts.

 

[dscher]

You could surmise, the Fed has been too slow and bond investors have know what needs and is going to happen well before the Fed finally acts.

Exactly. The bond market always tells the story. Leading indicator that the fed can't fight. So could we be in for some upside surprises in the fed funds rate? Absolutely. IMO.

 

[Folster]

Exactly. The bond market always tells the story. Leading indicator that the fed can't fight. So could we be in for some upside surprises in the fed funds rate? Absolutely. IMO.

Do you think they raise more than 50 bps this week?

I'm more interested in watching the balance sheet runoff. Do you have a source that is watching that?

 

[dscher]

Do you think they raise more than 50 bps this week?

I'm more interested in watching the balance sheet runoff. Do you have a source that is watching that?

Absolutely. All bets are off IMO. With the chart you just posted and some of my measures I'm watching.. it's like what I've posted in the past month or so. Higher short term rates along with lower long term. That would create the 3mo/10yr inversion I've said needs to happen again for a recession.

Balance sheet runoff... I've been talking about. I'm watching the bleed off of fed derivatives that has been occuring for weeks now. MBS/corporate/muni's/treasuries. Those have been leading indicators for markets going back to 2000 that I can see. That's the true balance sheet reduction IMO. By the time you see it on the feds website...it will be too late more than likely.

 

[Folster]

Absolutely. All bets are off IMO. With the chart you just posted and some of my measures I'm watching.. it's like what I've posted in the past month or so. Higher short term rates along with lower long term. That would create the 3mo/10yr inversion I've said needs to happen again for a recession.

Balance sheet runoff... I've been talking about. I'm watching the bleed off of fed derivatives that has been occuring for weeks now. MBS/corporate/muni's/treasuries. Those have been leading indicators for markets going back to 2000 that I can see. That's the true balance sheet reduction IMO. By the time you see it on the feds website...it will be too late more than likely.

S&P 500 to 2000? Is that your call?

 

[dscher]

S&P 500 to 2000? Is that your call?

Is that sarcasm? Or do you want my call? Lol

 

[Folster]

Is that sarcasm? Or do you want my call? Lol

I'm just asking if that is your call. If so what is the probability that you think it happens and in what timeframe? Because for any prediction to be useful it must be specific.

 

[dscher]

I'm just asking if that is your call. If so what is the probability that you think it happens and in what timeframe? Because for any prediction to be useful it must be specific.

Honestly. SPX, I see a testing of 3300 before a decent bounce. With volatility measure where they currently are, that's where I think true capitulation is likely to occur.

 

[dscher]

That level is very specific to the 200 week moving average (3400).. so I think we'll more than likely overthrow that into this range.

 

[Folster]

Honestly. SPX, I see a testing of 3300 before a decent bounce. With volatility measure where they currently are, that's where I think true capitulation is likely to occur.

Are you just looking at the pre-pandemic high as a support level?

 

[dscher]

Also, no real timeframe. I don't "time" in that manner. It could happen in weeks or months. IMO

 

[elindholm]

Honestly. SPX, I see a testing of 3300 before a decent bounce. With volatility measure where they currently are, that's where I think true capitulation is likely to occur.

So you're saying that, to fall to 2000, it would have to get below 3300 first?

 

[dscher]

Are you just looking at the pre-pandemic high as a support level?

No. I'm watching the breakout from 2020 November levels. Those have a huge gap up on all indexes that need to be filled. (Ie. All gaps get filled) It's also correlating with the 200 week MA as well. Those can be strong signals. Especially when other ma's have been breached. Which they have.

 

[Folster]

So you're saying that, to fall to 2000, it would have to get below 3300 first?

The math checks out.

 

[dscher]

So you're saying that, to fall to 2000, it would have to get below 3300 first?

2k is actually a decent level for the next leg down after some consolidation in the 3300 range. That would be our 200 month MA on the SPX.

 

[dscher]

Take or leave my numbers boys.. I just don't want ya getting destroyed. Good luck though..

 

[Folster]

Take or leave my numbers boys.. I just don't want ya getting destroyed. Good luck though..

I'll have plenty of company if so.

 

[dscher]

So, I'll leave this as just one example of bond market destruction occurring under the surface. Horizontal blue line corresponds with massive volume being traded in that range. The other 45 degree blue lines are showing 2008 MBS vs 2022 MBS. Take note...even during the GFC, MBS we're continuing their uptrend. While you see the significant distribution of MBS now. I've overlayed the SPX in black in line charting. This similar structure has happened in every debt instrument the fed has been buying for QE purposes..

You must be registered for see images attach

 

[Folster]

My winners from yesterday are my losers today.

 

[dscher]

My winners from yesterday are my losers today.

With volatility bonanza over the next few days, I think that will be common place for all of us..