Thank you guys for joining me and welcome to Episode 12 of Season 2 brought to you by Magnelibra Trading & Research (MTR). This episode is entitled “Powell FOMC Testimony and Its Risk On for Markets Sentiment Tracker”
Quick Disclaimer: The following podcast is for educational purposes only. This is not a solicitation to buy or sell commodity futures or options. The risk of trading securities, futures and options can be substantial and may not be appropriate for all listeners.
Ok guys, this week is dominated by Fed Chair Powell testifying and taking questions during his semiannual Monetary Policy Report to Congress. One thing we can take from his prepared testimony that does have some indication and forward guidance is this, "
With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance. -J Powell 2/11/25
We have said it many times, that he FOMCs best policy tool, their greatest policy mechanism, is “Buying Time.” They have the luxury of both acting in a rational pace and at times, having to act in an emergency fashion. This ability allows them the flexibility to adjust things accordingly and the plausible deniability that they are always “data dependent.”
Anyway there were a couple of good questions from a few senators. One of the Senators asked this to Fed Powell, “Can I have your commitment that as long as you are the Chairman of the FOMC, that we will never have central bank digital currency?
He aptly responded, "Yes"
This was a great question and answer, except at present the US Banking system has $17.9 Tn in deposits but physical cash is only $2.26 Tn...so its pretty much well known that 87.4% of all money transactions in the United States are "digital" debits and credit!
NJ Senator Kim, also had a great question, in regards to the burden on the tax payers caused from the Federal Reserve.
First off the FOMC has a $221Bn deferred asset (loss) so they are not remitting anything to the US Treasury thus they do not have any excess profits at this time. Second and more importantly the real cost to consumers from the FOMC is "Inflation."
FOMC inflation of its assets has been 9.9% annualized for the last 27 years. I would rather Senator Kim to ask Chair Powell why the FOMC needs to grow its asset base at such a rate if their mandate is 2% inflation?
Wyoming Senator Lummis talked about ChokePoint 2.0 and asked Powell why the FOMC doesn’t respond to their requests for greater information and transparency on their current digital asset oversight, as Wyoming is one of the few states embracing digital assets and their leadership there has been trying to create a haven for future growth in the industry.
So all in all the Q&A was pretty decent, but nothing really to take from it other than the FOMC is on autopilot here and feels that the current rate of interest at the short end is sufficient in the eyes of their dual mandate.
In other news Musk is targeting a buyout of OpenAI and continues its battle with Sam Altman, who kinda looks afraid, but it will be fun to see how this all filters out.
As far as economic numbers we have to be careful on Wednesday and Thursday as we have CPI and PPI respectively, Core CPI is expected unchanged at 0.3% and YoY is expected at 2.8% with Core CPI YoY at 3.1%. PPI is expected at 0.3% so be aware of these data prints when your trading tomorrow and Thursday.
On the earnings front, we will be watching SMCI today and we see a few consumer based services providers in the form of Upstart, DoorDash, and Lyft, so we may get a temperature on the health of consumer spending with these earnings and SMCI well, their stock has rallied from their $17 lows in late November to $40 bucks today, but a trade above $50 is needed to flip this thing back bullish, till then, we suspect sideways to lower, but today’s report and move should provide better guidance to that direction.
Ok let’s move to yesterday’s settlements where we rolled both Crude and RBoB from March to April futures expiry:
As far as the rolling changes Copper is the star here now over the last 30 days +9.06% with the DAX and Gold not far behind with Crude Oil the big loser -6.59%:
Here is the Dax chart pretty amazing run! ECB easing bias anyone?
As far as the Magnelibra CTA Markets Sentiment its all blue (long) as there are either a long bias or neutral with no shorts in any segments at this point:
When we look at the MEGA8s, the top 8 market cap stocks, Broadcom has moved back to positive on the year and META is the stand out thus far. Nvidia is back in the #2 spot. For this weeks basket hedge, we target the 533C in the QQQs:
When we see the total market cap chart, the 50p and 21p are coiled here so we either rally from this point of consolidation or we falter, so we are watching this closely:
As far as StrategyB, well the volatility is falling and from our data the volatility from Q4 2024 to present is down a massive 27% and its evident all the players involved are compressing this and its further evident in the negative return of the covered call selling strategy since Dec.1 2024:
We are also keeping an eye on that Bitcoin/Tether market cap ratio. You guys know that the Bitcoin price of $97k continues to be the bull/bear pivot and a magnet for pricing. This Tether market cap increase and the BTC price stagnation over the last 3 months is very interesting:
What this chart is telling us is that the Bitcoin price seems to be quite over valued when we look at it thru the Tether market cap lens and the current ratio of 13.6x BTC market cap to Tether. It will be interesting if we see Bitcoin start to trade below $90k, until then the bull traders seem to be safe with the $97k magnet price in effect.
Ok that is it, thank you to all our subscribers who continue to support what it is we do here and please give us a share and or at least a like if you can, it goes a very long way to promoting our work here organically. Till next time, cheers!
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