Summary
- Yields finally pushing through the technical barrier -- equity futures followed sharply higher as well, triggering our long trades positioned for this breakout in equities.
- TCB model tells us that 2-3 day of higher NY closes more in yields bring a top, but we have to meld that view with those of the equity indices.
- What the indices are telling me (and Tim) is that we have what could be a Wave 4 consolidation, which may even be a triangle. Triangles are penultimate wave 4s.
- Watch the behavior of the SPX Change Rate -- which provides the linkage to the liquidity flows illustrated by the Bank Reserve model, as well as the Bank Reserve and Treasury Cash Balance models. The SPX change rate peaked 4 trading days ago -- the Nominal SPX price is about to keel over.
- Prime Dealer gov't paper positioning continues to shrink, as foreign investors (foreign central banks) buy into rising U.S, long-term rates. The turn lower in yields comes when when Primary Dealers start hoarding gov't paper AND foreign central banks cease buying long-term government securities. If we have modeled the foreign central banks' behavior correctly, that turn should come very soon.
FEBRUARY 12, 2021
GOOD AFTERNOON EUROPE / GOOD MORNING EAST COAST
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 1:23 PM
I was just working on implications of the forthcoming sharp drawdown in Treasury Cash Balances -- the result blew me off, almost fell from my chair.
It is GOLD.
I will develop this theme into a story tonight. Meanwhile, the yield is finally moving higher, out of consolidation.
Due to the fact that the liquidity models have keeled over, except for the TCB model, we need to track how high the yields CAN go.
The TCB model tells us that another day or so of higher NY closes in yields, but we have to meld that view with those of the equity indices.
What the indices are telling me (and Tim) is that we have what could be a Wave 4 consolidation, which may even be a triangle.
Triangles are definitive wave 4s. The next upswing, from a triangle breakout, is Wave 5 -- terminal of the five wave sequence.
PAM will exit all the long hedges and overhedges when/if this happens.
TimK123Feb 12, 2021 3:46 PM
TimK123Feb 12, 2021 3:46 PM
Very good, trying to break out now after doing an ABCDE, pic:
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 2:08 PM
Watch the behavior of the SPX Change Rate -- which provides the linkage to the liquidity flows illustrated by the Bank Reserve Model. The SPX change rate peaked 4 trading days ago -- the Nominal SPX price is also about to keel over.
Watch the behavior of the SPX Change Rate versus the the liquidity flows illustrated by the Treasury Cash Balance Model. The SPX change rate peaked 4 trading days ago as well -- the Nominal SPX price is also about to keel over.
Watch the behavior of the SPX Change Rate versus the the liquidity flows illustrated by the Fed's Balance Sheet Model. The SPX change rate peaked 4 trading days ago as well -- the Nominal SPX price is also about to keel over here as well.
Conclusion -- the equity rally is living on borrowed time.
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 2:18 PM
all PAM BUYS 288 CONTRACTS OF NQH1 AT BREACH OF 13,740 , GTC -- FOR ALL FUNDS, INCL- TRACKER AND EIGER
bogeygolfFeb 12, 2021 4:09 PM
TCB model working today!
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 4:26 PM
indeed!
ptTL9Feb 12, 2021 4:39 PM
Robert, 3 weeks ago, to be exact on Jan 26, you showed 3 daily charts of ES, would appreciate if you can review them over the long US weekend. tia
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 4:51 PM
Hello Rita -- you mean these three EWP scenarios?
I still do not have enough data to choose which one fits the price pattern best. But the least decline is provided by the 3rd scenario, which calls for 3400 pullback. I will be very happy to have that, if it happens.
ptTL9Feb 12, 2021 5:10 PM
Yes Robert, thank you, hope your wishes come through, it will make me happy too. I believe you described it as "completing wave 3 and going into wave 4 of WAVE 1." Correct me if i am wrong
vm12953Feb 12, 2021 5:40 PM
Robert, do you think gold will follow the equities as well?
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 5:46 PM
vm12953 -- thats what we are trying to determine, because there is a strong tailwind for Gold when the Treasury starts reducing the Treasury Cash Balance. When that happens, Gold may appreciate massively. See chart below.
vm12953Feb 12, 2021 5:50 PM
Thank you
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 5:48 PM
PAM BUYS 288 CONTRACTS OF NQH1 AT BREACH OF 13,740 , GTC
*This order was filled.*
*NQH1 -- DONE AT 13,742.25 BOUGHT 288 CONTRACTS FOR ALL FUNDS, INCL- TRACKER AND EIGER*
fourscoreFeb 12, 2021 7:31 PM
"Conclusion -- the equity rally is living on borrowed time. " Time to sell SPXL in Algo?
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 7:58 PM
Probably not yet -- 4X20 -- still waiting for that final upside breakout-
fourscoreFeb 12, 2021 8:02 PM
+8
10xx6dbFeb 12, 2021 9:42 PM
Don't forget, Monday the CME Futures Mkt is closed from 1 PM until 6 PM for the Presidents Day holiday.
That's NY time
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 9:45 PM
Yield finally pushing through -- equity futures should follow.
john.derFeb 12, 2021 9:57 PM
Terminal high in yields or 1 more higher high?
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 10:01 PM
I was hoping for 1.23 at least
Scott007Feb 12, 2021 10:04 PM
did great though--wave 5 next week?
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 10:04 PM
Last kick for the final goal. It will be a frenetic half-day, Monday in the futures game.
flytightFeb 12, 2021 10:07 PM
robert.p.balan Robert, just brilliant call by you on yield rising and NQ rising above resistance. Just brilliant! Enjoy your weekend Mate
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 10:09 PM
Its about a foot and half of snow everywhere, even by the lakeside. Hard to not to be grouchy about the weekend.
flytightFeb 12, 2021 10:10 PM
You grew up in snow Cannuck! Put your skates on and have a good time.
Scott007Feb 12, 2021 10:10 PM
yup!! but warming up in sunny florida! have great weekend everyone in pam and take care of the Mrs for valentines day!
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 10:10 PM
Almost forgot that one --- Happy Valentines, everyone!
domlucFeb 12, 2021 10:12 PM
Thanks for the reminder, Scott.
Scott007 February 12, 2021 10:10 PM
yup!! but warming up in sunny florida! have great weekend everyone in pam and take care of the Mrs for valentines day!
domlucFeb 12, 2021 10:12 PM
Thanks for the reminder, Scott.
Scott007 February 12, 2021 10:10 PM
yup!! but warming up in sunny florida! have great weekend everyone in pam and take care of the Mrs for valentines day!
TimK123Feb 12, 2021 10:13 PM
I want to emigrate now
domlucFeb 12, 2021 10:13 PM
Come on down, TimK. I'm Miami, which is heaven right now.
TimK123Feb 12, 2021 10:15 PM
Thanks dom! Miami is a must-visit place for me, want to take a big boat around the harbor there and drink some Bud's and cocktails! Stunning!
nichaFeb 12, 2021 10:20 PM
How are the real estate prices in Miami?
alexis.zacharFeb 12, 2021 10:23 PM
real estate is very firm in Miami right now....lot of activity....many moving in from north...
Scott007Feb 12, 2021 10:51 PM
Real estate in the US booming. Still shortage in lumber. Great call months ago by RB and Stefan. WY and RFP double and triple respectively.
robert.p.balanModeratorLeaderOwnerFeb 12, 2021 10:16 PM
Look at NQ go!
10xx6dbFeb 12, 2021 10:18 PM
Thanks Robert. Have a great weekend.
john.derFeb 12, 2021 10:19 PM
Great call on yields in particular, Robert. Have a great weekend.
bogeygolfFeb 12, 2021 10:30 PM
Robert, great job on TCB and yields research this week. Now we just need your PD positioning edge to work at the top signal . . .
WEEKEND MUSINGS
FEBRUARY 13, 2021
robert.p.balanModeratorLeaderOwnerFeb 13, 2021 12:52 PM
bogeygolf
Prime Dealer gov't paper positioning continues to shrink, as foreign investors (foreign central banks) buys into rising U.S, long-term rates
The turn lower in yields comes when when Primary Dealers start hoarding gov't paper AND foreign central banks cease buying long-term government securities.
If we have modeled the foreign central banks' behavior correctly, that turn should come very soon.
robert.p.balanModeratorLeaderOwnerFeb 13, 2021 3:16 PM
Sun is shining finally -- need to get some sun. I will have more W/E musing tonight.
timothy.r.kiserModeratorFeb 13, 2021 4:11 PM
Walk 5 miles in the sunshine!
Pouring rain here.
sparketFeb 13, 2021 5:55 PM
Sub-freezing in Dallas!
centexlifeFeb 13, 2021 6:16 PM
Several hours forecasted at 0.00 F tomorrow night under 4” of snow here in Kerrville. Weather underground reported historic low of 7.0 for Kerrville. Didn’t we reach a sun spot minima? Climate change religionists just look up on a clear day. Sol Invictus.
robert.p.balanModeratorLeaderOwnerFeb 13, 2021 8:15 PM
Forthcoming long bond auctions:
Primary Dealers may try to run-up yields a day or two before the auction date.
The last 30Yr Bond auction (on Feb. 11) was terrible and ugly --- that provided the tailwind hat we are seeing in the rising long yields over the past two days.
Ugly, Tailing 30Y Auction: Bid To Cover Slides, Indirects Flee
Are bond buyers starting to fret about rising inflation?
gwizz1Feb 13, 2021 11:33 PM
If MOTUs intend for yields to go much lower, why not be more competitive at the auction (paying more for bonds or paying lower for yield)? Does this tell us that the yield won't go very low?
robert.p.balanFeb 13, 2021 11:37 PM
gwizz1 -- first they have to buy the bond -- like everyone else, they want to buy cheap (higher yield is cheaper than lower yield). So to get lower yields, they sometimes go "on strike" -- not to show too much interest -- and voila! they get higher yields (cheaper price)!
gwizz1Feb 13, 2021 11:39 PM
Sounds like a cartel (collusion) and not a free and open auction!
robert.p.balanFeb 13, 2021 11:39 PM
Primary Dealers are pretty much a cartel. That's why it is important to know when they are hoarding govt paper, instead of selling it to anyone (mostly institutions, and foreign central banks).
The Treasury really could not care less if they sell at lower prices (higher yield). Issuing debt just cost paper and ink. Any shortfall, they can re-issue or add to subsequent auctions. Have to keep your sales venue happy.
john.derFeb 14, 2021 1:10 AM
I have been lucky enough to be the seller of "sole sourced" product twice in my technology sales career. When there is a cartel or single price controller in a market, you can not imagine how much price can get controlled. ... I once had a customer yell at me, call me all kinds of names about the price I was charging on a product I knew had no competition.(Customer was a very large conglomerate. I was a startup.) I calmly smiled, apologized for how he might be feeling about the situation and then said: "the price is what it is, take it or leave it" .... Largest commission check of my career.
The company I worked for made >85% gross margin that year. ... selling hardware.... of course, once competition finally arrived, we were crushed, lol.
salmixFeb 14, 2021 5:32 PM
When looking at treasury yields in March 2020, I saw that there was a huge bond sell-off. My suspicion is that this was large-scale frontrunning exercise of expected treasury issuance and FED intervention, at taxpayer's expense.
robert.p.balanFeb 14, 2021 9:08 PM
Maybe Yield decline is what you are referring to Mr. Salmix. Bonds outperformed in March, last year.
salmixFeb 14, 2021 11:36 PM
TLT, for instance, dropped from 171.29 on March 9 to 144.35 on March 18; see plot below. The 10-year yield increased analogously.
salmixFeb 14, 2021 11:37 PM
robert.p.balanFeb 14, 2021 11:38 PM
You're right -- I was thinking of the drop in yields from November to first week of March. My apologies.
salmixFeb 14, 2021 11:42 PM
Thank you
xav_05Feb 14, 2021 11:50 PM
Hello Robert, whats your view with Bitcoin?
robert.p.balanModeratorLeaderOwnerFeb 14, 2021 11:54 PM
(Sorry, this chart is for PAM members only)
Waiting for a pullback to reset the longs which I offloaded in early January.
gwizz1Feb 15, 2021 2:17 AM
Government expenditure, 1Y% change of money supply (Quasi), 1Y% change social financing are all rolling over, but social financing (nominal?) is exploding to the upside?
robert.p.balanFeb 15, 2021 10:01 AM
The month to month volatility is evident in the chart -- will have to do something about that.
FEBRUARY 15, 2021
GOOD MORNING EUROPE / GOOD EVENING WEST COAST
robert.p.balanModeratorLeaderOwnerFeb 15, 2021 10:48 AM
We now have a working EWP schemata, and let's see the market prove or disapprove it, chart above.
Now, there is a slightly different variant, with a shorter timeline to a five wave sequence top in the YM -- so we have to watch the YM price evolution carefully. It may be that YM will top earlier than ES -- we will just have to deal with this, as we go into shortened NY futures trade today, chart above.
NQ goes with the ES timeline. We need to confirm this with more data, chart above.
robert.p.balanModeratorLeaderOwnerFeb 15, 2021 11:03 AM
The TN futures should help -- as the cash bond market is not trading today-
The bond futures are down sharply -- almost a full point.
robert.p.balanModeratorLeaderOwnerFeb 15, 2021 12:39 PM
But that bond yield surge (bond price decline) may end this week -- the current Treasury Cash Balance is now due for a large seasonal decline until late March-early April; in most years (as shown by the 5yr average of the 10yr yield), bond yields also fell until early April. See chart below.
How does the 10yr yield seasonality compares to the (synched) seasonality of the Fed's Balance Sheet? The look-ahead change in the seasonality of the Fed's BalSheet has been declining for two weeks. That suggests to us that the nominal 10yr yield should keel over soon, as well. See chart below.
We also have corroboration from the PAM High Frequency Treasury Yield Model, which typically provides a three-week look ahead forecast of major inflection points of the 10yr yield. This construct also suggest that the nominal 10yr yield should keel over soon.
(We will finalize the report after futures trading closes at 1:00 pm, NY time)
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---------------------------------------------------------------------------------------- Here is the current status of the PAM flagship Swing Fund, which includes open and closed trades.
During the twelve months of 2020, PAM delivered phenomenal real-dollar Hedge Fund trading performance, the best at Seeking Alpha:
PAM's flagship Swing Portfolio, year-to-date (December 31, 2020) delivered $100, 181,522.77 net profit on $11,172,813 margin capital.
Year-to-date performance: 860.27%, on 888-98 win-loss trades.
January 2021 spreadsheet here:
Year to date 2020 spreadsheet here.
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