And it may get weaker…
unlimited repo purchase, QE coming soon, rate cut in Dec. no need to fear right? asking for a friend.
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To me, today was just a reminder why I think paying less attention can actually be better. I check the markets too much, but I do think I am getting better at filtering out the noise and only making trades when I need to.
For example, today I noticed that after the meeting the markets were down pretty sharp. The old me may have sold thinking here is the beginning of a big drawdown. Today I just thought " that is interesting, but the dip doesn’t really tell me much about how the day or week will end. Plus my strategy doesn’t revolve around fed announcements or at least not 90% of it doesn’t. Therefore why would I even think about trading if I don’t have a signal based on my criteria."
After the meeting the market was down about 0.7% but then reversed to be up about 0.25% by the end of the day. To me trading based on fed announcements is impossible at worst and extremely difficult at best. Do any successful traders here make same day moves based on fed announcements with success? (Prove it with track record please)
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Rates should be cut before weakness, less strong maybe, but not weak. Could the end be near for the fake fed, what they do is play games.
I feel like I am in a in the twilight zone episode in this market
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There is something that happened that is not being really mentioned in the news. The Fed cannot cut rates anymore due to the issue in the US overnight lending situation. Let me explain, the Fed placed around 120 BN (over two days) in the US overnight market to reduce the O/N lending rate from 12% back to 2%. They said it was down to the Saudi event but that is not entirely true. As you know banks cannot trade in markets now due to Dodd Franks and rely now on arbitrage between the base rate and actual rate on mortgages, loans, , etc. The US banks do make decent profits but these profits will soon disappear quickly due to the Fed cutting and they are at risk of a run of further equity sellers. The banks have regulatory commitments, capital requirements, etc. and are concerned about 2020 and the fact the Fed will not be able to raise rates any time soon or until trade is back to normal, which it wont - I agree. One thing we see is how QE is being resisted now and that is because the Fed likes to buy at the bottom and sell at the top - just like us, it doesn’t want to commit to QE at these levels - it could be too risky and they are private - do not forget that. The banks are worried and stopped lending and ok it may have been triggered by geopolitical issues but it continued well after the event and still the Fed is closely watching the situation. Do not ignore this problem. I believe we cannot go much higher in equities due to the fact earnings softened considerably and that will continue due to more damage from trade, its lagging effect. So, the bulls have used yesterday as an excuse to continue the trend up but the problems have got worse. Draghi committed more QE but its not a good idea and most countries that are net committers do not agree. The ECB is fighting in the courts still I believe?
Also, because most are on black they are making things up like more QE and rate cuts, do not be fooled please. We have a little more to go and then October US earnings will be a disappointment IMHO. They are priced estimates too high IMHO.
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