Leading Liquidity and the week ahead
Happy Monday and welcome to another week in the markets. It seems the weekends move by at a faster and faster pace lately.
While digging through some research this weekend, I found a few interesting pieces of information on liquidity and the overall market, using the largest central banks as a canary, there is almost a perfect correlation to their balance sheet liquidity and the S&P.
First, that chart is courtesy of GLJ Investment Strategy.
Second, what it shows should be telling to everyone, the red line is the total add/subtract of the 10 largest central banks, and the green is the SPX. As it moves, so does the ES it would appear. While this may be a “duh” moment for some, I thought it was an interesting way to potentially see what the markets are setting up to do. With this recent drop in liquidity, are the markets setting up for a minor pullback?
The week ahead
With the above as a macro theme, let’s take a look at some of the more interesting charts heading into the week.
First up is the SPY. We have seen a pretty amazing run-up from the lows at the end of last year. The 443s look to be a double top, at least for the time being.
We will see if er get a pullback from it or if we just motor right through. As they Say, don’t fight the FED, and while they have attempted to posture a tough stance, there is only so much they can do if they want to attempt a “Soft landing”.
Next, let’s take a quick look at the VIX
It had a pretty decent rally off the lows last week, reaching a high over 17 (just a short while though). It is still “elevated” comparably resting at 15 and a half as I write this. Anything continuation in the VIX could be a solid addition to the thesis at the beginning of this email that the SPX is due for a breather.
Anyone trading options should be happy with this, higher VIX often leads to higher premiums on puts making a Cash Secured Put mildly more profitable albeit you will be knife-catching at the bottom. That’s a hobby of mine though so it never bothered me much.
Finally last week’s sector rotation box score. Energy has led the way with Conumser staples at the rear of the back.
Good luck trading this week and if you found this helpful, It would mean a great deal to me to subscribe and share this around.