They just bought another $6 billion in bonds. But it's totally... not... Quantitative Easing.
| | Good morning: | If you're wondering how the stock market continues to see more upward pressure… remember - markets are driven by capital in the global system. | And that requires a lot of stability in the bond market. The Federal Reserve claims that it's unwinding its balance sheet (now sitting at $6.7 trillion). | But over the last few weeks, we've awaken to the latest Treasury News update on its bond and bill auction results. | | And time and time again, the Federal Reserve's System Open Market Account (SOMA) has been a sizable buyer of U.S. debt. | Yesterday, they added another $6.02 billion. | They'll claim that it's not Quantitative Easing. But what matters is the result - not the name of the action. All these efforts aim to stabilize bond yields, instill confidence among other buyers of debt, and prevent a blowout in U.S. government costs. | They might be repurchasing bonds they had previously allowed to roll off… but they are still purchasing bonds. QE? Not-QE? Doesn't matter… the end goal is the same. | Which matters because more liquidity flows into the system help drive assets. This was the case in late 2022 and early 2023 when the Fed and Treasury engaged in various forms of direct support to the financial system - but just called the programs something different (like the Bank Term Funding Program or BTFP). | This is always an interesting time because bears can get caught fighting against the Fed and not even know they're doing it. Keep a very close eye on these Treasury updates - the Fed has now bought nearly $70 billion in bonds in the last two weeks. | Now… let's get to our subjects on Market Masters this morning… | Tune In, Tune Up | All sectors are in positive territory again on Friday - but we're seeing some weakness play out in technology and energy. This will be a fine day for momentum based trading - particularly with the top names in the space like Nvidia (NVDA) and Tesla (TSLA). We'll dig into the breakout names on our screens, and showcase how to set up Volume Weighted Average Price (VWAP). | Inflation on Tap and Rebalancing | Goldman Sachs said that pension funds are about to sell roughly $20 billion in stocks today as part of an effort to rebalance positions. I'll explain what it means to be "back to balance…" and show you the types of assets that funds may be targeting as we focus on June trading. | Meanwhile. We'll get the Personal Consumption Expenditures (PCE) on inflation today. Economists project that we'll see a month-over-month increase and an annual increase of 2.2%. Core PCE, however, is expected to come in around 2.6% That's above the Federal Reserve's target of 2%. | Is A Reversion on Tap? | Finally, mind the Gap… Gap Stores (GAP) stock is off 16% after reporting weak earnings. Today could be a great day for reversion trades if the stock overshoots to the downside. We'll breakout VWAP and show you the specific spot to target for a long call trade on Friday if the conditions align. | It's all live. It's all here. And it all starts in 30 minutes. Click this link to join me in the room. | See you soon. | Garrett Baldwin |
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