Fed Bails on MBS & Quick Market Comment

Magnelibra Econemotions is back and we were undergoing some logistical moves and will now be back on schedule to bringing you daily updated content. We have to say, the markets continue to act as if the world is safe and sound. Yes we know that the propensity for optimism is for all intents and purposes, a good thing for all of humanity. However the underlying uncertainty and unfettered onslaught of narrative tells us that the volatility is there, its just heavily suppressed by the central banks propensity to print money. However markets were rising last week amidst a hefty $37 Billion drop in the Fed balance sheet, led by a $42 Billion reduction in Mortgage Backed Securities (MBS) as noted in the following graphic:

Source: Fed H4

We know the markets were led last week by increased stimulus expectations, however, Trump put those speculations to rest with the following tweets today:

So with the markets clearly running ahead of themselves and with the entire financial sphere certainly spellbound by further stimulus, we feel that graphics like this from the WSJ don’t look optimistic, but rather ominous in warning:

With that let’s look at a few markets we are closely following, first up the SP500 where we know the 3420/30 area has posed its problems for the index:

Next up the Nasdaq:

The NQ is above the 50eMA but is well plagued by the 11550 area. All of this equity optimism has led the bond market lower (all the MBS selling or roll off by the Fed hasn’t helped) but a clear double bottom once again is forming:

Finally, onto Silver where by the correction below the $26.50 area continues to magnet the $24 area:

Ok, that’s it for now, we will be back and we appreciate your patience with our offerings as we continue to try and forge ahead and create a business model that we think will lead to greener pastures.

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-Magnelibra Econemotions

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