Fed Ahead

Last week, Wacky Wednesday Week sure was very kind to us. Aka downside swings on trading days bordering the Wend before options expiration which seems to always involve many unwinds.  

And that's a mighty fine front end of a V I'm seeing in commods right about now.  We should bounce around 2020-25, and depending on the close, Monday could get very ugly. Breaking 2000 would open the floodgates back down to the Aug low and beyond.  Whats the date? Dec 11th. Hmm, mid Dec, how bout that.  

The seasonal contraction of flows is axiomatic (consistent for over 100 years). The FRB H3 shows that we should start to see a gradual increase in required reserves through 1st week of Feb.  Due to the 30 day lag, no economic effect until early March. 

Concomitant with further global economic contraction, hence our leaning towards no bottoms until March. TBD. The truly disturbing part of the H3 is the dwindling monetary base, tis the season, however…  and growth in means of payment getting squeezed  to almost nothing.

With the DXY hitting 100 and oil almost hitting the Dec $35 target, one might be tempted to call it a day. DXY consolidating at 97.2, yet the CNY/USD went from 6.41 (we mentioned this the other day) to our disturbance threshold of 6.45 within 2 days. meaning… 

More Chinese "dollar" liquidity issues, and global carry trade unwinds which could be problematic and we cannot preclude further downside in oil or commods as the "dollar" gets squeezed. There could be a very large market decline to open on Monday.

IMHO, Fed meeting and federal budget deadline concomitant next week.  Market could be down/sideways chop until Fed meeting, raise gets a temporary bump, then lack of year end volume drags it sideways with quarter and year end, asset managers reallocation and putting on window dressing. After first of year, the destructor slams into this thing.