But, This Ship Can't Sink?

20 Kas 2020

In a move that's shocking both Wall Street and Main Street, Treasury secretary Steve Mnuchin has officially put the FED on notice in a bid to end the FED's Emergency Lending Programs by year end. Headlines from popular economists are circling the MSM, and some are saying this is the equivalent of removing the lifeboats from the Titanic. First of all, that's hilarious, considering there were never enough lifeboats to begin with, (because the ship was seen as unsinkable), at least not for the poor passengers. But, the point here is this; the Trump administration is signaling they're not going to hand the Biden administration a basket of goods as a farewell gift. Unfortunately, what this translates to, inter alia, is the FED won't be able to buy their favorite Mega-Tech bonds, essentially putting a direct stop to the billions flowing into the heavy weight side of the stock market through this particular program, and through low interest rate debt funded buy-backs. In addition, ending this program also put's credit markets at risk of a crash for a number of reasons. Most importantly, we've never had such a high percentage of BBB- (lowest level of investment grade) rated bonds in history. If any of these bonds drop even a single rating level, many, many, trillions of dollars sitting in pension funds, would be breaking their mandates, which is to stick to investment grade paper. So in other words, extremely large funds may start dumping BBB- bonds in the near term. Yields would spike alongside inflation, leading the FED toward a single conclusion, which is to raise rates, and discourage borrowing. As ZeroHedge so elequently put it, "Let's hope America's Zombie companies have learned how to swim after all those years of treading water." Finally, as the legendary MC Hammer would put it, "Uh oh."

SPY Analysis:

After breaking through key supports earlier in the week, the bulls have a difficult job on their hands today. Although we're sitting right below the megaphone and ascending channel trendlines (converging around 357), sentiment is turned notably negative today, with Giuliani and Sidney powell's update on the Trump administration's lawsuits last night, along with the news from the Treasury. We're seeing an unusual risk-off mood heading into the weekend. Lastly, each time we've approached the megaphone trendline (357) on the weekly, absent a break above, we've gotten a strong rejection. On the monthly, if the bulls are unable to keep us above 357, we could revisit 320 again very soon. My exit is 300...

As always guys, stay tuned for live updates throughout the day, and thank you for your time, I appreciate all the support. If you enjoyed today's analysis, please hit the Like button and subscribe to our profile. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. Cheers, Michael.

20 Kas 2020

Not

Here's my view from the hourly:

20 Kas 2020

Not

20 Kas 2020

Not

Black Friday discounts at the nearest Gap...