You partying? Wayne? You?
Well, after expecting a bounce for an annoyingly long while the fledgling thing we had going before Mr. Powell’s jawbone was finally rammed home today. A world full of endorphin releasing Waynes and Garths are in full sentiment relief mode.
Perfect. But, this…
There has definitely been some short-term over bearish sentiment buildup that needed to be addressed and so the match was lit. But here is a reminder that there is short-term and there is longer-term. This excerpt from NFTRH 526 is from November 18th. Sentiment had been short-term contrary bullish for some time now. But I still maintain that the bullish sentiment explosion of last January may well have been a bull killer.
Back on Fed policy, in 2000 and 2007 the Fed halted (green dashed 3 mo. T Bill rate shown on the chart above) and the market topped. So what again are casino patrons celebrating here? Santa may be coming, but Powell’s not wearing a red suit.
So when you see a withdrawal of the doom headlines like the one I posted in the first link above and a replacement with happy stories, consider that the last two cycles may be good analogs for the current situation. Especially since, as the Macro Tourist so well laid out last week, there has been concurrent “shadow” tightening going on with the withdrawal of QE. Here is a graphic from his article.
The economy and financial system were hooked up to a veritable I.V. of monetary fluids non-stop for years. Maybe that makes it a cycle breaker, a bullish FrankenMarket on steroids. Then again, maybe it has greatly reduced its ability to fight off disease in the absence of the perma I.V. drip.
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