The 2014 "flash crash"

[flow5]

The only unsolved problem in economics is how to make everybody rich and a king.

The "seasonal's" are applied to nearly all economic stats, that is, they are reported as "seasonally adjusted"figures (they are actually seasonally mal-adjusted figures). That's the reason financial publications say certain historical months out of the calendar year are stronger or weaker for stocks,etc., than others.

Seasonal adjustments have their roots in the fallacious "real bills" doctrine…"In the original federal reserve act of 1913 "It was anticipated that credit extended by the Federal Reserve Banks to commercial banks would rise and fall withseasonal and longer term variations in business activity"..."From the beginning, the Federal Reserve was reasonably successful in accommodating the seasonal swings in the demand for currency—in the terminology of the act, providing for “and elastic currency”."

The FOMC is tasked to provide yearly seasonal “accommodation” as business activity waxes and wanes. And the problem is theFOMC doesn't recognize that the theory and mechanics are the same for seasonal mal-adjustments & the "Real Bills" arguments.

I haven't done any yearly comparisons. I'm too lazy (even though my memory often fails me and the data can’t be retrofitted).The bottom line is that the seasonal's reflect the 10 month rate-of-change in monetary flows (our "means-of-payment" money times its transactions rate-of-turnover). Required (legal) reserves (RRs),reflect these transaction type deposit classifications 30days prior. I.e., RRs serve as the policy metric for our primary moneystock (means-of-payment money). Money flows are cumulative figures. Roc’s in short-term money flows (proxy for real-output), are always a mirror image of the seasonal economic inflection pattern (empirical evidence that roc’s in MVt = roc’s in real-output).

See: bit.ly/yUdRIZ

Quantitative Easing and Money Growth:
Potential for Higher Inflation?
Daniel L. Thornton

The “unified theory” is that the NBs are the customersof the CBs. Thus all demand drafts originating from the NBs clear thru the payment system (commercial banking system). And “bank reserves are largely driven by payments” (bank debits)-Dr. Richard Anderson, former V.P. and senior economist at the FRB-STL. Legal reserves are a surrogate for monetary flows (bank debits or total spending). 95 percent of all demand drafts clear thru demand deposits (see G.6 release c. 1996).

See: In 1931 a commission was established on Member Bank Reserve Requirements. The commission completed their recommendations on Feb. 5, 1938. The study was entitled "Member Bank Reserve Requirements -- Analysis of Committee Proposal" It's 2nd proposal:

"Requirements against debits to deposits"

This research paper was "declassified" on March23, 1983. By the time this paper was "declassified", RRs had become a "tax" [sic]. Roc's in RRs = roc's in nominal-gDp. But e-mail 11/16/06: “Spencer, this is an interesting idea. Since no one in the Fed tracks reserves…” Dr. Richard Anderson - FRB-STL

The scientific evidence is irrefutable. The trajectory for the 24 month rate-of-change (roc), in monetary flows (the scientific method), now projects a deceleration in the inflation indices throughthe end of 2014. And that the 10 month roc (proxy for real-output), mirrors the seasonal economic inflection is scientific proof. Bothlags have been mathematical constants for the last 100 years.

This drop (projection), is somewhat diminished by not discounting future monetary expansion (data from the H.6 money stock release shows real-money rapidly expanding), not discounting any increase in Vt (e.g., non-bank lending/investing), & the annual decline in seasonal factors.

1/1/2014 ,,,,,,, 0.158 ,,,,,,, 0.344 ,,,,,,, 0.417
2/1/2014 ,,,,,,, 0.126 ,,,,,,, 0.381 ,,,,,,,0.410
3/1/2014 ,,,,,,, 0.139 ,,,,,,, 0.315 ,,,,,,, 0.407
4/1/2014 ,,,,,,, 0.154 ,,,,,,, 0.333 ,,,,,,, 0.402
5/1/2014 ,,,,,,, 0.146 ,,,,,,, 0.390 ,,,,,,, 0.397
6/1/2014 ,,,,,,, 0.128 ,,,,,,, 0.344 ,,,,,,, 0.395
7/1/2014 ,,,,,,, 0.168 ,,,,,,, 0.337 ,,,,,,, 0.387
8/1/2014 ,,,,,,, 0.128 ,,,,,,, 0.300 ,,,,,,, 0.378
9/1/2014 ,,,,,,, 0.125 ,,,,,,, 0.309 ,,,,,,, 0.368
10/1/2014 ,,,,,,, 0.047 ,,,,,,, 0.267 ,,,,,,, 0.357
11/1/2014 ,,,,,,, 0.051 ,,,,,,, 0.258 ,,,,,,, 0.347
12/1/2014 ,,,,,,, 0.063 ,,,,,,, 0.195 ,,,,,,, 0.338

There is no reason to have recessions or business cycles. The Fed has the capability to smooth out any fluctuation in aggregate monetary purchasing power.

[flow5]

Caveat emptor. The 5/6/10 and 2/27/07 market downswings were almost immediately erased by the awesome power of the FRB-NY's "trading desk". We could get an intra-day market reversal if the Fed waits as long as it did on 10/19/87. We could get some kind of pre-emptive intervention: like the 9/11 terrorist  attack, or the date change associated with millennium computer modifications (Y2K), that took place in Jan 2000.  Be prepared

[flow5]

Stocks are rising - so Soros is a little off in his timing (maybe you have to go against the grain to position yourself with big numbers). Stocks are going to fall (maybe not by much), but they should recover as the money stock and credit are both growing at high rates (stocks and real-money move in lock-step).

We'll soon be able to evaluate the strength of the decline in the subsequent weeks. Rising numbers between the 3rd and the 17th will signify unusual strength. Falling numbers between the 18th and the 1st will signify unusual weakness.

[flow5]

The financial world is full of half-cocked, egotistical, wannabes. I'm not selling myself or anything else - just the truth. When roc's in MVt fall by 8 percentage points, so will the market. By how much, I haven't tried to figure out.


This is what I sent to Dr. Richard Anderson (former V.P., and senior economist, FRB-STL), prior to the Flash Crash of May 6th 2010 (incontradistinction to the "Black Swan" theorists):


Written on Mar 30 11:31 am prior to the MAY 6th FLASH CRASH:

"Contrary to economic theory, & Nobel laureate Dr. Milton Friedman, monetary lags are not "long & variable". The lags for monetary flows (MVt), i.e., the proxies for (1) real-growth, and for (2) inflation indices, are historically, always, fixed in length (mathematical constants). However the lag for nominal gdp (the FED's target??), varies widely."

Assuming no quick countervailing stimulus:

2010
jan..... 0.54.... 0.25 top
feb..... 0.50.... 0.10
mar.... 0.54.... 0.08
apr..... 0.46.... 0.09 top
may.... 0.41.... 0.01 stocks fall

Been saying this for the last 6 months. Should see shortly. Stock market makes a double top in Jan & Apr. Then the real-output of final goods & services falls/inverts from (9) to (1) from Apr to May.

Recent history indicates that this will be a marked, short, one month drop, in rate-of-change for real-output (-8). So stocks follow the economy down..."



flow5 Message #10 - 05/03/10 07:30 PM
The markets usually turn (pivot) on May 5th (+ or - 1 day).

[flow5]

Market rotations in sync with the seasonal trend. Flash crash is assigned a higher probability.

[damnotagain]

Great reading flow! 

[flow5]

The "doubting Thomas's" are about to get clobbered. Could have one more 2 week upswing starting next week. If not, then the market's going to fall further than I am now expecting.

[flow5]

Sept 11, 2014 release: Note the rapid deceleration in money stock growth:

Percent change at seasonally adjusted annual rates

M1 M2
  

3 Months from May 2014 TO Aug. 2014
3.4 and 5.3

6 Months from Feb. 2014 TO Aug. 2014
6.9 and 5.7

12 Months from Aug. 2013 TO Aug. 2014
10.1 and 6.5

[flow5]

July 3, 2014 release: Percent change at seasonally adjusted annual rates

M1  M2

3 Months from Feb. 2014 TO May 2014
10.3 5.8

6 Months from Nov. 2013 TO May 2014
14.2 6.8

12 Months from May 2013 TO May 2014
10.5 6.6

[flow5]

"Chairman Greenspan added, 'The historical relationships between money and income, and between money and the price level have largely broken down, depriving the aggregates of much of their usefulness as guides to policy. At least for the time being, M2 has been downgraded as a reliable indicator of financial conditions in the economy, and no single variable has yet been identified to take its place.' "

How funny. The ratio of demand drafts clearing thru transaction based accounts relative to non-m1 savings/investment accounts is:

  500 to < 3.

[bimetalaupt]

Sept 13, 2014 16:57:03 GMT -5 flow5 said:

"Chairman Greenspan added, 'The historical relationships between money and income, and between money and the price level have largely broken down, depriving the aggregates of much of their usefulness as guides to policy. At least for the time being, M2 has been downgraded as a reliable indicator of financial conditions in the economy, and no single variable has yet been identified to take its place.' "

How funny. The ratio of demand drafts clearing thru transaction based accounts relative to non-m1 savings/investment accounts is:

  500 to < 3.

flow5,

Sorry but I did no see what your saying: three WHAT?  MMXVI-ALPHA HAS THE HAS THE PEARSON CORRELATION OF M3 TO DJIA FROM 12-31-2008 TO LAST FRIDAY( 9/12/2014)  90.9168534598%.

Pearson correlation of M2 to Dow Jones Total US Stock market  from 12/31/2004 to Friday 9/12/2014 was 96.9838266435%.

That looks like a good correlation to me: Permutation grant you produce a better number that was near 100%.

Just a thought,

BiMetalAuPt

last run

Reply #19 posted Sep 1, 2014 at 2:45pm

Quote Edit like Post Options

.
Post by bimetalaupt on Sep 1, 2014 at 2:45pm

New 90 day (3 month) Permutation re-re-re derangement study ( alpha MMXV- Good Permutation Test))/

correlation of M3 to DJIA....... 99.7573637580%
forecast ..............................17394.4592572526(11-31-2014)
Lamma ..............................99.989893530230%
I read this to indicate buying from 10-31-2014 to 11-15-2014) stochastic cross of %K&%D from under 20% as a buy. ++
from the new Alpha MMXV study ( inspired by Springer Series in Statistics, Phillip Good, Permutation Tests, 14.2 Maximizing the Power; page 169-178.)
Just a thought,
BiMetalAuPt

[bimetalaupt]

Sept 13, 2014 16:57:03 GMT -5 flow5 said:

"Chairman Greenspan added, 'The historical relationships between money and income, and between money and the price level have largely broken down, depriving the aggregates of much of their usefulness as guides to policy. At least for the time being, M2 has been downgraded as a reliable indicator of financial conditions in the economy, and no single variable has yet been identified to take its place.' "

How funny. The ratio of demand drafts clearing thru transaction based accounts relative to non-m1 savings/investment accounts is:

  500 to < 3.

flow5,

 I see it now: missed the (non-) on line one: so I added to the MMXVI-Alpha

None M1-M3 to Dow Jones Total US Stock market(12/31/2004 to 9/14/2014) -49.5932391399%.

Thank-you,

BiMetalAuPt

[flow5]

Author comes to roughly the same conclusion on Seeking Alpha:

How To Use Money Supply Statistics For Market Predictions

Sep. 13, 2014 9:49 AM ET | 24 comments | Includes: DIA, QQQ, SPY



Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)






Summary
•Ultimately, what determines stock prices, and all other prices for that matter, is the money supply.
•The most accurate picture of the money supply at any given time is the 1-week M2 average, published by the Fed every week.
•In the past, a stagnant 1-week average for more than 20 weeks has immediately preceded stock market crashes, as happened in July 2011 and September 2008.
•Currently, the 1-week average has remained stagnant for 20 weeks.

The next Federal Open Market Committee (FOMC) meeting will take place on September 16-17. Minutes will be released 3 weeks later. My preferred way to describe an FOMC meeting is this: A small group of people who can print as much money as they want and buy anything they want with it, coming together and deciding how much money to print and what to spend it on.

Justification for their decisions comes in the form of econometric technobabble backed by macroeconomic statistics compiled by bureaucrats about the state of the job market and GDP growth. My question is, if it is moral for them to print money and buy stuff with it for the sake of the economy, why is it called counterfeiting if anyone else does it?

That aside, what never gets discussed in these meetings, at least I've never seen it discussed, is the actual amount of money in the Federal Reserve System itself. By Federal Reserve System I mean the total amount of dollars that exist in every Federal Reserve member bank, be it in the form of savings, demand deposits, small denomination time deposits, or physical currency. How much is there? By how much is it increasing or decreasing as time goes by? One would think that the money supply would be the main topic of discussion for the institution that is in charge of regulating the money supply.

Why is it important? Let's consider a simple thought experiment. Imagine that the money supply were cut in half overnight. What would happen to stock prices? Someone would hit a sell at market order and whoever was thinking about buying beforehand, now only has half as much money as he did yesterday. The stock will fall, not necessarily by exactly half, but very sharply.

Ultimately, beyond all the catalysts and technicals, even fundamentals you can think of, what drives the stock market in the end is the fundamental of fundamentals, and that is the money supply itself.

The Federal Reserve releases statistics on the money supply every Thursday at 4:30pm EST, but never speaks about these statistics to the media. Among Fed watchers there are several ways to monitor these spreadsheets. First let's review what is actually on them.

Table 1



On the first table (the one above is taken from the September 11, 2014 release), you will see a seasonally adjusted vs. a non-seasonally adjusted monthly average of M1 and M2. M1 is currency plus demand deposits. M2 is M1 plus savings deposits, time deposits, and money market funds. The actual number is the non-seasonally adjusted number. Seasonal adjustment tries to average out bumps by assuming the continuation of seasonal trends in the money supply. It is less reliable for getting a picture of the actual amount of dollars in existence at any given time.

Monthly averaging is a good estimation, but it is not the most precise measurement on the release, because on any given day (any given second really) money supply can fall or rise sharply if someone makes a big withdrawal from or deposit into, the Federal Reserve System.

Table Two

(click to enlarge)


Table two shows both seasonally adjusted and non-seasonally adjusted M1 and M2 on 13-week, 4-week, and 1-week averages. If we are concerned with the amount of money available for bidding up the stock market at any given time, the non-seasonally adjusted M2 1-week average is the most precise snapshot-in-time figure available for seeing how many dollars are currently in the system. While the 4 and 13-week averages can give you a better idea of trends, the 1-week is the best for assessing the current situation as it is.

Tables 3 and on show the components of M1 or M2 that are changing week to week.

The question is, what is the best tool for helping you assess the state of the market and your next trading moves? Is it money supply trends as shown by the 13-week average, or more precise snapshots that you can see in the 1-week? This is a matter of debate among Fed-watching investors and traders.

1-Week versus 13-Week Averages

In my opinion, the 1-week average is a better tool for the simple reason that when a big player like a major commercial wants to spend money on stocks, that bank does not withdraw money from a 4 or 13-week average. The bank spends money on stocks from the money supply as it is in the present moment. Granted, that's not the 1-week average either, but that's the closest we can get to it.

The 1-week average is compiled from the average daily tally of M2 over the course of one week. Here's another thought experiment. Imagine two 13-week stretches, one in which the money supply stays constant at $1B (say we're on a gold standard and there is no mining), the other in which the money supply starts out at $1B, and increases by $1B every week for 12 weeks. Then finally, on week 13 some Lehman or other goes bankrupt, there is a giant bank run and money supply crashes back down to $1B. The two 13-week periods would look something like this:







Supply A (Gold Standard)

Supply B (Fractional Reserve Paper Standard)


Week 1

$1B

Week 1

$1B


Week 2

$1B

Week 2

$2B


Week 3

$1B

Week 3

$3B


Week 4

$1B

Week 4

$4B


Week 5

$1B

Week 5

$5B


Week 6

$1B

Week 6

$6B


Week 7

$1B

Week 7

$7B


Week 8

$1B

Week 8

$8B


Week 9

$1B

Week 9

$9B


Week 10

$1B

Week 10

$10B


Week 11

$1B

Week 11

$11B


Week 12

$1B

Week 12

$12B


Week 13

$1B

Week 13 (Bank Run)

$1B


13-Week Average

$1B

13-Week Average

$6.077B


During the first 13-week stretch where money supply stays constant, you would see a 13-week average of $1B. During the second 13-week stretch, you would see an average of $6B. (1B+2B+3B etc. / 13) Looking at just the two 13-week averages, you would see the first average at $1B, and then the second at $6B, conclude that money supply is growing by 600% per quarter, and buy stocks.

However, what is actually happening is that during the previous 12 weeks people were pumping the new money into stocks, and suddenly on week 13 the money is no longer there. Money supply is not growing at all and stocks are about to fall sharply in response to a crash in the money supply. That is why it is crucial to look at the 1-week average to determine your next move rather than the 13-week average, which is only good for spotting broad trends.

If only the real world were as simple as a thought experiment though. How can we use the same logic to predict market movements using the 1-week average? Basically, if the M2 1-week shrinks over a long period of time (20 weeks or more), stock prices will usually go down and perhaps even crash. This is what happened in September 2008. Below is a table of 1-week M2 averages in billions of dollars from April 7th until September 29th, the day of the massive VIX spike.






Apr.

7

7788.6


14

7790.3


21

7771


28

7638.4


May

5

7658.4


12

7669.7


19

7671


26

7649.1


June

2

7684.8


9

7708.7


16

7714.9


23

7659.9


30

7651.1


July

7

7734.6


14

7715.5


21

7705.5


28

7665.6


Aug.

4

7726.7


11

7729.1


18

7720.2


25

7679.5


Sep.

1

7696.1


8

7730.8


15

7747.1


22

7803.6


29

7786


As you can see here, after a period of 25 weeks, the money supply ended of where it began the period, at precisely $7.79T. Contrast that with what was happening in the 25-week period beforehand, from October 8, 2007 until March 31, 2008:






Oct.

8

7394.4


15

7391.1


22

7353.4


29

7355.3


Nov.

5

7414.5


12

7411.3


19

7439.8


26

7440.5


Dec.

3

7465


10

7490.7


17

7505.8


24

7502


31

7512


Jan.

7

7496.7


14

7465.4


21

7457.9


28

7433.4


Feb.

4

7513.9


11

7528.1


18

7544.7


25

7556.1


Mar.

3

7617.1


10

7664.1


17

7706.8


24

7700.3


31

7709.2


Money supply was up 4.2% taking the first and last snapshots of the period. Growth paused for a maximum of only 10 weeks during that period, from November 19 until January 28. Otherwise the trend was consistently up.

Something similar happened during the flash crash of July 2011. In the last week of January 2011, for whatever reason, M2 contracted by 1.4%, a very drastic drop, and was only up by 2.3% 21 weeks later. The money supply started growing after that 21-week break, but 21 weeks was a long enough period of time of no growth to set a crash in motion.

July 2011 Bear






Jan.

3

8885.2


10

8880.2


17

8901


24

8778.7


31

8775.6


Feb.

7

8855.7


14

8871.7


21

8871.3


28

8890.8


Mar.

7

8976.8


14

8987.9


21

8983.6


28

8961.9


Apr.

4

9044.5


11

9053.3


18

9089.7


25

9013.1


May

2

8998.9


9

9030.3


16

9055.3


23

9005.5


30

9025.3


June

6

9104.6


13

9107


20

9118.7


27

9132.1


July

4

9264.6


11

9259.5


Bull Market 2012:

If we compare this to a raging bull market like the one in the second half of 2012, we see no long periods of stagnancy in the money supply. The longest period of no growth was only 11 weeks. Otherwise M2 was up 6.3% over a 25-week period, very strong growth.






June

25

9863.2


July

2

9964.7


9

10009.2


16

10003.1


23

9925.9


30

9942.2


Aug.

6

10037.4


13

10059.1


20

10033.1


27

10004.2


Sep.

3

10103.8


10

10151.3


17

10172.4


24

10053.2


Oct.

1

10154.9


8

10199.1


15

10231.7


22

10168.9


29

10181


Nov.

5

10335.3


12

10303.8


19

10302.4


26

10275.3


Dec.

3

10375.6


10

10427.4


17

10491.1


Using these as benchmarks, we can analyze where we are currently. Here is the current situation, taking a look at a 20-week period beginning April 14th.

Current Situation






Apr.

14

11,353.1


21

11,293.4


28

11,170.4


May

5

11,224.4


12

11,224.8


19

11,218.6


26

11,192.2


June

2

11,304.1


9

11,322.3


16

11,340.0


23

11,249.8


30

11,301.3


July

7

11,381.9


14

11,378.0


21

11,349.5


28

11,323.6


Aug.

4

11,422.3


11

11,394.1


18

11,406.0


25

11,349.1


Sept.

1

11,410.8


M2 has grown by only .5% in 20 weeks. It is basically stagnant. If by next month we see a number similar to $11.35T in the 1-week column, we will be in a very similar situation monetarily speaking to where we were on September 28, 2008. The longer the period of zero M2 growth by the 1-week average, the more dangerous it is for the current price level in the market.

Whichever way you slice it, the one-week M2 average has about 4 to 5 weeks to start growing fast and growing consistently. Any drop below the $11.35T mark from October onward will mean serious trouble.

Perhaps this is why George Soros increased his bet against (NYSEARCA:SPY) to $2B last week. In a month or so, those puts could really start to pay off.

Conclusion

The one-week average - not the 13-week average - is the best picture of the current money supply publicly available. If that number grows consistently without stalling for more than 10 weeks, then stocks can rise, but won't necessarily do so. If that number stays stagnant for more than 20 weeks, we enter a danger zone. If it stays stagnant for more than 25 weeks, we are in a September 2008 situation. The next 5 weeks will tell. Stay tuned.

[bimetalaupt]

Flow

QUICK COMPERISON SHOWS A NET DECREASE IN SAVING( none-m1-m3) VS M3

for the period of 12/31/2004 to 9/12/2014:12/31/2008 to 9/12/2014 produce closer  to 100% results.

...........................................................NONE M1-M3................................. M3
djia to None-m1-m3.............................. 55.1571600190%.......................... 60.9545278066%
qqq to NONE-M1-M3.............................. 75.4950039795%...........................77.8201784346%

Just a thought,

BiMetalAuPt

[flow5]

BI:

My take is that measuring savings/investment type accounts (liquid assets), against economic growth is more a measure of the one-time turnover of an identical volume of M1 (these liquid assets clear thru M1).

[flow5]

High interest rates and expectations of higher prices have been both cause and effect of rising rates of Vt. Vt has recently risen.

[flow5]

Higher rates are both a cause and an effect of higher rates of Vt (as the recent rise in rates suggests).

[flow5]

M2 and stocks

bit.ly/1pi9JLe

Money Supply (M2) and the Stock Market

November 29, 2011 • Posted in Economic Indicators

[bimetalaupt]

Sept 16, 2014 13:22:06 GMT -5 flow5 said:

M2 and stocks

bit.ly/1pi9JLe

Money Supply (M2) and the Stock Market

November 29, 2011 • Posted in Economic Indicators

Flow5, Great point..

M2 to DJ Total US  Stock market (ending 12/31/2007).........96.9838266435%

as ,M2 to M3.............................................................98.663580590%
 Greenspan's argument that M3 did not give him enough additional information to justify the cost of more data might have a element of truth.

The M2 to DJIA ( 12/31/1999 to 12/31/2007) less then 50%..........49.1019800847%

but the period from 12/31/2008 to 9/15/2014)..............................96.7594701812%

10 YEAR INCLUDING 2008..........................................................69.7446559512%

THE BLACK SWAN EVENTS DO MAKE THE CORRELATION WEAK..( 9-11 & Lehman Bro)

Just a thought,

BiMetalAuPt

 

[Aman A.K.A. Ahamburger]

Sept 16, 2014 16:05:01 GMT -5 bimetalaupt said:

Sept 16, 2014 13:22:06 GMT -5 flow5 said:

M2 and stocks

bit.ly/1pi9JLe

Money Supply (M2) and the Stock Market

November 29, 2011 • Posted in Economic Indicators

Flow5, Great point..

M2 to DJ Total US  Stock market (ending 12/31/2007).........96.9838266435%

as ,M2 to M3.............................................................98.663580590%
 Greenspan's argument that M3 did not give him enough additional information to justify the cost of more data might have a element of truth.

The M2 to DJIA ( 12/31/1999 to 12/31/2007) less then 50%..........49.1019800847%

but the period from 12/31/2008 to 9/15/2014)..............................96.7594701812%

10 YEAR INCLUDING 2008..........................................................69.7446559512%

THE BLACK SWAN EVENTS DO MAKE THE CORRELATION WEAK..( 9-11 & Lehman Bro)

Just a thought,

BiMetalAuPt

 

You should see what happens when you run these numbers through your math model. Graph doesn't lie, this is some insane correlation...



I'm thinking, current model with 99% M3 correlation for bull market indicators, with a black swan indicator built on the 30+ year correlation that is margin debt that would give bear model statistics.

As you say JAT,

[flow5]

August CPI falls (-) .02 percent.

[flow5]

No "flash crash" this year for stocks.

[flow5]

The composition of bank credit has changed (more gov'ts). Periods of slow economic growth are characterized by an increase in cash and cash equivalents. This usually occurs coming out of recessions. But it's happening again now.  NIM (for the CBs), is at reporting level lows.

Elliot wave projects a wave high (corresponding to CB payments and maintenance). "The SPX count suggests the market is currently in Intermediate wave v of Major 5." The last uptrend of Primary III. The seasonal break should begin 10/1/2014 + or - a couple of days. 

[flow5]

I am the greatest market timer in history.

[damnotagain]

Nice!

[flow5]

Market reversed on Thursday, and I got that right too (gold too - down). MVt was only down 4 percentage points with the latest figures (less than the average move). RRPs increased on the H.4.1 (Fed's still thinking about raising rates). Friday's always an outlier (reserves count for 3 days on Fridays). Effective FFR trading down for several days.  You have to want to be a day trader in this environment. 

Maybe we should start another Turtles experiment.

[bimetalaupt]

Oct 4, 2014 13:38:43 GMT -5 flow5 said:

Market reversed on Thursday, and I got that right too (gold too - down). MVt was only down 4 percentage points with the latest figures (less than the average move). RRPs increased on the H.4.1 (Fed's still thinking about raising rates). Friday's always an outlier (reserves count for 3 days on Fridays). Effective FFR trading down for several days.  You have to want to be a day trader in this environment. 

Maybe we should start another Turtles experiment.

Flow5,

 It is amazing how T-Bonds are holding up.  Jessie said the "market is never wrong" : this has been proven time and time again.  Again: this has a ring of worry to it for the world's economic balance.

I was looking at the ECB and the nut that runs it: sure miss the worlds greatest banker: my Father.

I use the worms to test my theory.  The increase in numbers until they reach max population for the space and food supply and then limit the demand on resources by limiting Population development  : looks like the world is there now.

Just a thought,

BiMetalAuPt 

[flow5]

I'm sure it would have been interesting to meet him (runs in the family).

Markets consolidating and basing until the 15th.

Bonds are a function of the average of short-term rates.   They will move into both oversold and undervalued territory depending on how long they trend in one direction or the other.  I use the 24 month moving average of the 24 month roc in long-term money flows.  Both long-term roc's in MVt and its moving average portend lower bond yields (higher prices).  But, like you already forecast, by the end of the 1st qtr. of 2015, the Fed could still raise its policy rate.

[bimetalaupt]

Oct 7, 2014 16:26:30 GMT -5 flow5 said:

I'm sure it would have been interesting to meet him (runs in the family).

Markets consolidating and basing until the 15th.

Bonds are a function of the average of short-term rates.   They will move into both oversold and undervalued territory depending on how long they trend in one direction or the other.  I use the 24 month moving average of the 24 month roc in long-term money flows.  Both long-term roc's in MVt and its moving average portend lower bond yields (higher prices).  But, like you already forecast, by the end of the 1st qtr. of 2015, the Fed could still raise its policy rate.

FLOW5,

Thank you for your kind words!

WHAT ARE YOUR THOUGHT ON TODAY'S REVERSE REPO?

Quick Question,

BiMetalAuPt

[flow5]

The volume of RRPs maturing within 15 days on the H.4.1 “Factors Affecting Reserve Balances” release rose from 261,724 ($M) on Sept 25 to 311,292 ($M) as of Oct 2.

Then today, on the FRB-NY’s daily “Temporary Open Market Operations” website, the “desk” did RRPs totaling 184,514 ($M) tanking the stock market (entirely the Fed's mistake).

When the rate-of-change in MVt decelerates, the Fed's supposed to offset the decline.

Janet Yellen should be fired. The recent high volatility in stocks is due to the RRP facility. Whereas QE operations were predominately conducted with CB counterparties, the RRP facility obviously deals with largely NB counterparties. RRP transactions deplete both reserves and the money stock, whereas QE operations were largely just asset swaps.

Don’t know what’s in the queue, but the most recent OMO will be settled today (injecting new money). The probability is that stocks will reverse.