This week left most people dazed and confused, in terms of what is going on in the stock market.
From one vantage point the action was net positive. After all, Trump’s trade war, massive debt increases, slowing earnings/GDP and general overvaluation have failed to push this market much lower.
On the flip side, something is seriously wrong. Even legendary investor and Vanguard founder Jack Bogle jumped in by suggesting Bogle on stock turbulence: ‘never seen a market this volatile to this extent in my career’
Here is one possible explanation……The FED is no longer floating this market, just the opposite…..
Fed’s QE-Unwind Proceeds Despite Stock Market Sell-Offs (chart above)
The sixth month of the QE-Unwind ended on March 31, which is reflected in the Fed’s balance sheet, released this afternoon, for the week ending April 4. The QE-Unwind appears to be on automatic pilot, clicking along at the pace that accelerated in January, despite the sporadic stock market sell-offs since early February.
During the years of QE, the Fed acquired a total of $3.4 trillion in Treasury securities and mortgage-backed securities. The MBS are backed by mortgages that are guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Now the Fed is shedding those securities at a rate that accelerates every quarter until it reaches its maximum pace of up to $50 billion a month in Q4 2018.
Very well…….
Now, lets pile on Trump’s trade war, historically high valuation levels (arguably the highest in history), massive debt increases and trade deficits, rising interest rates, slowing corporate earnings growth/GDP, skyrocketing geopolitical risks, etc…..
AND……
Well, you have a potential for a really bloody stock market crash.
If you would like to find out if the stock market is about to crash or surge up the wall of worry instead, please Click Here
– State of the Market Address:
- The Dow is back below 24,000
- Shiller’s Adjusted S&P P/E ratio is now at 31.34 Slightly off highs, but still arguably at the highest level in history (if we adjust for 2000 distortions) and still above 1929 top of 29.55.
- Weekly RSI at 48 – neutral. Daily RSI is at 44 – neutral.
- Prior years corrections terminated at around 200 day moving average. Located at around 19,000 today (on weekly).
- Weekly Stochastics at 15 – oversold. Daily at 52 – neutral.
- NYSE McClellan Oscillator is at +2 Neutral.
- Commercial VIX interest is now 70K contracts net short.
- Last week’s CTO Reports suggest that commercials (smart money) have, more or less, shifted back into a net bearish position. For now, the Dow is 2X net short, the S&P is at 4X net short, Russell 2000 is 2X net short and the Nasdaq is 2X net long.
Having said that, if you would like to find out exactly what happens next based on our Timing and Mathematical work, please Click Here.
ATTENTION!!! Please note, we have moved most of our free editorial content to our new website MarketSpartans.com Please Click Here to view it.
