ES Journal - 2019/2020

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https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20181219.pdf

HEATHER LONG. Hi, Heather Long from the Washington Post. Today, the Fed lowered its expectations for interest rate increases. Given that, I’m wondering if the Fed has had any discussion of altering the course of balance sheet normalization and if you could give us any insight on what might lead the FOMC to alter that balance sheet normalization in 2019.

CHAIRMAN POWELL. Sure. If you go back some years, I think we—people who were working at the Fed in 2013 and ’14 took away the lesson that the markets could be very sensitive to news about the size of the balance sheet, the pace of asset purchases, the pace of runoff, and things like that. So we thought carefully about this, on how to normalize policy, and came to the view that we would effectively have the balance sheet runoff on automatic pilot and use monetary policy, rate policy, to adjust to incoming data.

And I think that has been a good decision. I think that the runoff of the balance sheet has been smooth and has served its purpose. And I don’t see us changing that.
 
The only thing Rickshaw got right is that the sovereign debt bubble will be historic. When? Not today.

Otherwise, for the millionth time... REPO IS NOT QE!! It is ultra-short-term (overnight) and in some instances, short-term UP TO 32 day lending to qualified institutions (domestic and foreign) WITH US T-BILL COLLATERAL! The borrow reverses itself in most cases within hours (overnight). EOY ALWAYS produces elevated levels. This year is shrouded with more fuzziness than usual.

There is a problem with bank-to-bank overnight lending, aka Fed Funds. There is a counter-party risk that a few want to avoid dealing, or talking about. Hence the REPO window situation. We will get some detail in the new year.
 
tiddlywinks said:
There is a problem with bank-to-bank overnight lending, aka Fed Funds. There is a counter-party risk that a few want to avoid dealing, or talking about. Hence the REPO window situation. We will get some detail in the new year.
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Indeed....someone needs to explain in plain English the FED's actions both with regard to their REPOS activity as well as their management of the Fed Funds rate.
 
The markets are assuming here that the Phase 1 trade deal is actually going to be signed. THAT remains to be seen. God help the markets if something falls apart in this fiasco before it is signed, or Trump has a bad cheeseburger and changes his mind about it.
 
syswizard said:
Indeed....someone needs to explain in plain English the FED's actions both with regard to their REPOS activity as well as their management of the Fed Funds rate.
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FOMC does not speak in plain terms. They create problems to fix problems...That's it plain and simple.
 
This "parabolic upmove" has been nice, but also looking forward to the next "market in turmoil" week with several 100+ point range days.
 
FXtrader8911 said:
This 28.58% needs to be put into perspective, 2018 ended with a 20% correction so the first +20% in 2019 was a recovery, leaving 8.58% as the net gain.

Caution is required for January... too many negative factors were ignored in Nov/Dec 2019, these will factor-in in Jan when players start taking profits.
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As of yesterday - we're at 29,24 % for the year.

I can add your perspective as an additional requirement. Let's look at the sample I just provided, but filter on years where the prior year closed down 10% from the high that year.

In 2018, we closed down -17,31 % from the high that year.

This additional filter reduces our sample from n = 10 to n = 2.

For both these two years, the following year made all time highs and closed net + 4,46 % and + 8,48 %. So, it's still bullish.

To make a technical prediction for the year ahead - I would also factor in the length and size of this entire bull market which as far as I know must be both the largest and longest in history.

So yes - caution. But I'd be just as cautious shorting this on the basis of the market being 'overbought'.

PS: Not sure if I believe it's possible to predict a year ahead. Probably not. But as traders, it's always wise to entertain and plan for various scenarios. Also, it's fun to run the numbers and see what's happened in the past on similar patterns - especially since the numbers often come out different than one might think.
 
I thought the market had a tired toppy feel a week or so ago, but my impression atm is there is still yet more juice in the tank to go higher, another couple of days at least, maybe more, but a couple of days outlook is all I care about.
 
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