Creditcane™: REPETERE AD INFINITUM: CAVEAT EMPTOR.
Bullish long day. Midpoint above EMA(10). Still above all SMA's. Tested and held the new 0.0% retrace (1439.15). New high on daily 3LB (reversal is 1402.08). QE2infinity.
Bearish long day. Midpoint below EMA(10). Still failing the 38.2% retrace (79.97). Still failing all SMA's. New low on dally 3LB (reversal is 80.17).
Bearish long day. Midpoint below EMA(10). Tested and failed SMA(21). Tested and failed its 0.0% retrace (14.27). New low on daily 3LB (reversal is 17.82).
Bullish long day. Midpoint above EMA(10). Tested and held its 38.2% retrace (1730.90). Still above all SMA's. New high on daily 3LB (reversal is 1696.00). Must have the precious.
Bullish long day. Midpoint above EMA(10). Still above all SMA's. Holding above its 61.8% minor retrace (1.2750). New high on daily 3LB (reversal is 1.2798).
Bullish long day. Midpoint above EMA(10). Still above all SMA's. Holding above its 61.8% minor retrace (40.10). New high on daily 3LB (reversal is 40.19).
Spinning top day. Tested and failed SMA(144). Midpoint above EMA(10). Tested and held its 38.2% minor retrace (17.47). No daily 3LB changes (reversal is 16.73).
Bullish long day. Tested and held SMA(233). Midpoint above EMA(10). Holding above its 38.2% retrace (95.94). Dally 3LB reversal up (reversal is 94.62).
Bullish long day. Still above all SMA's. Midpoint above EMA(10). Holding above its 38.2% minor retrace (32.15). New high on daily 3LB (reversal is 32.41).
Bullish long day. Midpoint above EMA(10). Still above all SMA's. Tested and held its 61.8% minor retrace (50.92). New high on daily 3LB (reversal is 49.27).
Spinning top day. Still above all SMA's. Midpoint above EMA(10). Tested and held its 61.8% minor retrace (0.7765). New high on daily 3LB (reversal is 0.7630).
Bullish short day. Midpoint above EMA(10). Still above all SMA's. Tested and held its 38.2% retrace (3.673). New high on daily 3LB (reversal is 3.645).
Bullish short day. Now above all SMA's. Midpoint above EMA(10). Tested and failed its new 0.0% retrace (683.29). Daily 3LB reversal up (reversal is 660.59).
Bullish short day. Midpoint above EMA(10). Still above all SMA's. Holding above its 61.8% minor retrace (312.29). New high on daily 3LB (reversal is 313.24).
IT HAS BEGUN. YOU HAVE BEEN WARNED.
7 comments:
Well at least there is no more QE hopium in store for the FOMC meetings. Ben is scared or why would he make in unlimited? plus there is only around $680B of 10-30yr UST in the market that the Fed doesn't already own.
Todays move just breached the Bollinger Band to the upside. BB (200,2) daily chart of the SPX.
The base case that Goldman was selling in the economic commentary leading up to the announcement was that the base case was for QE in MBS and extended forward rate guidance. Both of those flashed across my terminal this afternoon. To be perfectly transparent, I don't think that the open-endedness of the program was anticipated by the market.
The market reaction was initially mixed before the gravity of the easing was grasped. Initially, a lot of participants tried to sell the news, including the full cast of bears in my office (>50% of my co-workers). I heard all kinds of rationale for why this doesn't change anything and why you should still be short the basis blah blah blah.
My immediate reaction was pure bullishness and I retain that opinion. Prior to this announcement, I was thinking the basis in long corps might tighten another 30 bps before this rally is over. Now, I'm not sure what to think, but 30 bps sounds pessimistic, given the scope of the queasing.
I'm the first person to say that fiscal policy is much more potent and immediate than monetary policy; however, we have two major political parties that are busy arguing over which bad policy is better. On the margin, there are going to be more mortgage refis which means more money in consumers pockets (whether or not they spend it is another thing entirely). Additionally, given the primary secondary spread in the mortgage market, this is marginal income for the money center banks, who have become ruthlessly efficient at pushing and processing refis.
Whether or not you agree with the moral hazards introduced and maintained by the Fed, trading should always be divorced from your beliefs regarding politics.
Matthew
Trading should also be divorced from your belief regarding the economy also. IMHO.
FTR the inflation the Fed worries is WAGE inflation not prices. Until there is a serious rise in wages the Fed will never see inflation. Now the ROTW will fall apart as food prices start to rise again (like they did the last time).
BTW, I was actually a little excited about this Fed release (from a spectator's perspective). I had all of my rates windows open and, separately, I had the FNCL 3.0 intraday price graph front and center. The initial reaction was awesome. The 3s, which were already up ~4 ticks (IIRC) jumped 16 ticks, immediately retraced, and then headed for the moon when the market realized that the Fed was going to be sucking down a monstrous amount of the TBA liquidity in this coupon. It was amazing how long it took the market to digest the Fed statement and finally bid these up.
The roll spiked up to 11 or 12 on those during the day (I didn't look at end of day to see if that subsided). Needless to say, those will be on special for a while. I didn't pay attention to the 3.5s, but those will also be part of the Fed's program.
Just a couple of interesting technicals, for those of you not in the fixed income space: This year will see negative net issuance in MBS space. The new QE program, combined with the reinvestment of paydowns in the Fed's MBS portfolio, is expected to take down 50 to 75% of the gross issuance. Factor in the recent equity offerings from REITs and you have a shrinking market catching a bid from all angles. It's not hard to see why MM surveys consistently show an overwhelming overweight the mortgage basis.
Without doubt, overweight the mortgage basis is a crowded trade that looks a little scary; I liken it to the overcrowded Treasury trade that has persisted for several years. When a trade has technicals this strong, you can only be neutral or long. If you try to short, you might as well have someone hold your place in the soup kitchen line, because you are going to the poor house.
I will try to check in tomorrow to see if anyone else had some thoughts on QE.
Thanks for all of the charts, commentary, sarcasm, and humour, AmenRa (every day). I wish I wasn't so busy these days so I could check in more often.
Have a good evening,
Matt
Not the follow thru day the bulls were hoping for. Just sayin'
New post up.
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