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January Effect, Easy/Hard assets, Confidence Collapse, and Happy New Year

Happy New Year!  “Stuff” has to happen soon.  The Fed will likely cut at the March meeting. We have hints from the UK that the power will go out – but at least “they” told you to prepare, amirite? Above all, “they” want all us little people to remain terrified, living in fear, hiding under the bed.

user profile picture davefairtex Dec 31, 2023
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Fed Balance Sheet (WALCL): -11.3B (-0.15% w/w).  QT continuing.  32-month low.
Strategic Petroleum Reserve (WCSSTUS1): +793k (+0.22% w/w); slight refill.
Total Bank Credit (TOTBKCR): +30.2B (+0.17% w/w).  Expansion (8.8% annualized).
30 Year Mortgage Rate (MORTGAGE30US): 6.61% (-6 bp w/w); 7 month low
10 Year Treasury Yield (DGS10): 3.89% (-1 bp w/w); 5 month low.
Auto/Light Truck Sales (ALTSALES): -0.83% m/m; 7-month low.

It appears as though the banking sector is recovering (thanks to that “stealth bank rescue”), at least to some degree.  In the last month, bank credit has expanded by $102 billion – about +0.59% m/m, while the Fed has shed about 98 billion in QT.  How long will the good news last?  That’s the question.

Usually not much happens before New Year’s – except sometimes there is “tax loss selling” in assets that have declined during the year, where people sell these items in their taxable account in order to offset any gains they might have made.  In addition, there is the end-of-year RMD requirement for any retirement accounts (IRAs) once you get above a certain age.  After New Year’s, there is the “January Effect”, which is basically all that pension money that gets dumped into funds in the new year and has to be allocated somewhere.

So prices typically drop towards the end of December, and they rally into January.  Although not always, since sometimes traders anticipate the January Effect and load up on stuff at the end of December.  There is no free lunch, it turns out.

The buck fell for the first part of the week, then bounced back on Friday, resulting in a weekly loss of 0.31 [-0.30%] to 101.03.  This is a 5% drop since the Stealth Bank Rescue started in early November.  The weekly “hammer” candle print looks bullish, and the daily “swing low” was even more bullish – but the trend models haven’t been convinced just yet.  Is confetti time over?  Maybe.  But it looked like that at the end of November, and then the buck made a new low.  This week’s new low still has the buck in a strong downtrend in the longer-term timeframes.

The RMB made a new low this week, losing 0.65%.  For the Mainland, the dollar-confetti process remains in play.

Even though the buck moved lower, gold didn’t change much; it moved up just 2.70 (+0.13%) to 2071.80.  Prices had risen nicely into Wednesday, but then selling emerged on Thursday and…

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An Extended Maunder Minimum
Hmmmm…an extended Maunder Minimum would make greenhouses a necessity and living further north a bad idea.
I wonder what the global shifts in...
Anonymous Author by cmartenson
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