(March 5, 2021): Primary Dealers, Central Banks Accelerate Long Bond Purchases; PAM Resets Long Equity Trades, For A Test Of Previous Index Highs Next Week

Summary

• We were anticipating market lows today (Friday). The trough did come but amidst extreme market volatility caused by FDIC announcement that the SLR will not be extended -- markets unhappy.
• It's equities strangely having a tantrum due to SLR issues which are remit of the bond market; yields were rock steady. This equity tantrum will pass quickly, and it did.
• We earlier removed out short hedges, but "just-in-case" new, insurance short hedges were filled by falling equities triggered by the SLR tantrum. These hedges were inoculated by new long hedges.
• We went heavily long equities after the SLR tantrum. There are positive events happening over the weekend. The stimulus bill will probably be acted finally acted upon, inter alia -- so the new short hedges were offset with long hedges. There is also possibility that the Fed will do a virtual meeting, and finally do something about the surging long end yield. That should ignite equities early next week.
• As we described in the PAM report of Wednesday, March 3, 2021 (link below), there is evidence that the still rising Fed's Balance Sheet will continue to support BOTH a rise in equities and yields for a few days longer. What may realistically happen, as we said in Wednesday's report, is that when yields are not rising (or are falling) equities will rally higher; and vice versa. But the general trend for both equities and yields could be higher for a week longer. Then, historical seasonality of the Fed's Balance Sheet outflows kicks in, and will be a negative factor for both equities and yields until third week of March. Yields should we lower, and equities could be lower as well during this period.

Still Rising Fed Balance Sheet Supports A Rally In Yields And In Equities For A Few Days Longer

MARCH 5, 2021

GOOD AFTERNOON EUROPE / GOOD EVENING WEST COAST

robert.p.balanModeratorLeaderOwnerMar 5, 2021 11:26 AM

There may be one more upswing in 10yr yields before a larger decline.

NQH1

That should also see a downswing for NQH1 and the rest of the index futures.

RTYH1

YMH1

ESH1

h.voiceMar 5, 2021 10:16 AM

Anyone else seeing the bearish horizontal triangle in equities?

john.derMar 5, 2021 2:56 PM

.... not once pre-market algos are done with it, lol.

robert.p.balanModeratorLeaderOwnerMar 5, 2021 11:43 AM

There are events happening over the weekend. The stimulus bill will probably be acted finally acted upon, inter alia -- so we are keeping the short hedges on a limited leash. There is also possibility that the Fed will do a virtual meeting, and finally do something about the surging long end yield.

gelstretchMar 5, 2021 8:33 AM

Hello Quazi.... I am not trading the markets this week, as I am engaged in some activities that precludes the opportunity to be logged in to my computers. However a quick glance at the /NQ and /ES futures on the Daily charts clearly identifies a market in decline. My charts are signaling more price destruction with price now approaching a 3 ATR correction on these larger time frame charts. I might consider a potential bottoming, but the signals are not yet apparent, even on the smaller time frames such as the 30 minute, where price will first reflect a change in direction.

john.derMar 5, 2021 12:08 AM

Noticed that the GDX rose yesterday. That was surprising. Made me think: Are the paper commodity and miner markets getting disconnected? This would be a bankster squeeze scenario. .... just sayin'.

TimK123Mar 5, 2021 8:49 PM

Yes maybe, or also someone loading up before the bottom in gold perhaps. Or on the WSB hit list LOL.

flytightMar 5, 2021 2:29 PM

GM I am noticing that the markets remain very volatile this morning even though the indices numbers don't really show that. NQ as an example is swinging 50 points up and down as it searches out S/L positions, going down as much as 50 points to buy them out, then return to their upside positions. My gut feeling is that we will see another hit to the downside at the open, just like we saw yesterday.

vjapnMar 5, 2021 11:51 AM

Good morning Robert, I hope you had a restful nights sleep for your test. Other than increasing bond purchases, what else can the FED do to bring down interest rates?

stephane.cMar 5, 2021 11:56 AM

Hi Robert, what's your take on oil? It is just a news driven pop about to reverse?

robert.p.balanModeratorLeaderOwnerMar 5, 2021 12:00 PM

vjapn -- This issue has been discussed over the past two weeks, and I just don't the energy and time to rehash all of it in one sitting. I can point to you some of the reports, but for the rest, kindly do it in your time. Just scan over the daily reports over the past two weeks -- they are all there.

(Feb 22-23, 2021): Surviving The Market "Flash Crash"; Why There Will Be No Yield Cap Control In 2021, Even In H1 2022

stephane.c -- I see the OPEC+ decision to hold off supplies as a geopolitical ploy -- KSA's reply to the Biden government's initiative to tag MBS as mastermind for the murder of Khassogi. Tim is already complaining about $3.00/gallon gasoline. So, no idea, this is not about the economics of crude oil processing anymore -- it could stay for a while.

stephane.cMar 5, 2021 12:10 PM

Thanks Robert

stephane.cMar 5, 2021 12:11 PM

Spreads are reaching their maximum historical levels consistent with a temporary top

RM13Mar 5, 2021 2:29 PM

I'l be looking to get out of the rest of puts and VXX calls by the end of today (not at opening because of equity price spike).. Stimulus will pass at some point and provide some push up for the market, and we were near 3 bottom SD on SPY and QQQ, in order to go lower, we have to go higher now..

Triple.F.FredMar 5, 2021 2:40 P

I agree RM.I am looking to cash my hedges this morning as well...

nichaMar 5, 2021 2:51 PM

RM..what's the DN today? Thank you.

RM13Mar 5, 2021 3:09 PM

Delta neutral for SPY 30%, for QQQ 56%, mildly bullish.. this isn't seeing stresses in futures market

flytightMar 5, 2021 3:11 PM

Crazy this morning as indices are up and down as if in the Sears Tower. Robert's call on yield this morning was spot on and everyone panicked with pants on fire. I have now read RB full report this morning and he is looking for one more correction to the downside so we shall see if that happens this morning. With the stimulus bill due on Saturday you have to go back and think of March 24th when the last stimulus bill was passed. The markets took off and never looked back. If I was a betting man, I would look for a similar response from traders, to institutions to retail.

Triple.F.FredMar 5, 2021 3:54 PM

Very likely correct... If we can get another drop, I have some bullets loaded!

QuaziMar 5, 2021 4:03 PM

Will the stimulus bill pass so quickly? If not the markets should continue to drop ...

RM13Mar 5, 2021 4:44 PM

One obvious point to close shorts would be Thursday bottom, but the key here whether that holds..

littletiger101Mar 5, 2021 4:46 PM

Seems that every rising is shorted down.

RM13Mar 5, 2021 5:26 PM

The prior lows didn't hold, so hold them at least into the afternoon to see where this thing lands..

RM13Mar 5, 2021 6:06 PM

Since the support has now turned into resistance - and we broke through that on the way higher, out of shorts.. If we go back below 12300 on NQ, I'll reinstitute them..

Brent.ChavezMar 5, 2021 6:07 P

RM13 You are out of short position at this time correct?

RM13Mar 5, 2021 6:09 PM

I'm out of shorts now.. If we go below 12300 I'll consider reinstating them.. Just to let you know, VXX calls work well, EEM puts were underpriced, and finding a tech based option is hard, they are all expensive..

robert.p.balanModeratorLeaderOwnerMar 5, 2021 3:21 PM

Looks like the blow out jobs data convinced the bond market that there will be no run-away money printing -- and lit a fire under the equities as the economy may indeed be finally healing.

user.52846056Mar 5, 2021 3:20 PM

How much do you think it will fall.

robert.p.balan March 5, 2021 3:19 PM

The bond yields were stable to lower, as Primary Dealers, Institutional, and Central Banks accelerated their purchases of long-term bond, attracted by the high yields (which is unlikely to last for long).

user.52846056Mar 5, 2021 3:22 PM

Feels like good news finally

robert.p.balanModeratorLeaderOwnerMar 5, 2021 3:22 PM

Its just one detail -- but hopefully there will be more of it. This weekend events could be more crucial however, i,e the stimmy bill.

robert.p.balanModeratorLeaderOwnerMar 5, 2021 3:25 PM

For now, we will probably see this EWP schemata in the yields, and we look how it develops from there.The priority is how to exit the RTYH1 short hedge at circa 2145. It is still possible for a correction lower in RTY ewven if we have seen the bottom,

Major lows get to be tested before the rally resumes.

john.derMar 5, 2021 3:52 PM

Two things: (1)Algos prematurely popping futures pre-market because they don't interpret reports, they just search. (2)Banksters looking at order flow from yesterday, seeing where everyone was shorting and then sweeping that area for stops before moving lower. .... 3777 on ES is not a great area for ES to stay under for any length of time for bulls, imho.

ptTL9Mar 5, 2021 7:47 PM

john.der What is your call for the rest of the day.

john.derMar 5, 2021 7:48 PM

LOL. .... This still could be a wave 2 irregular. But, at this point, who knows.

Can't call this until it resolves itself up or down.

ptTL9Mar 5, 2021 7:50 PM

john.der Fridays are bullish lately, and if market will have higher close than last Friday....LOL

QuaziMar 5, 2021 8:05 PM

Never seen volatility like this before.

john.derMar 5, 2021 8:20 PM

I call it really nasty bankster shit. ... Destroy everyone in the market, taking out all bulls and bears for the day, then they can push the market where they want it to go after taking out all weak participants.

yunengMar 5, 2021 4:00 PM

I agree John. That move is most certainly momentum driven. Ziggy-zaggy volatility. I only managed to scalp part of the move up.

robert.p.balanModeratorLeaderOwnerMar 5, 2021 4:19 PM

robert.p.balanModeratorLeaderOwnerMar 5, 2021 4:21 PM

all PAM BUYS BACK 144 CONTRACTS RTYH1 TO EXIT RTY SHORT HEDGES TO PROTECT LONG SCALPERS AT 2130 LIMIT OR BETTER, GTC -- ALL FUNDS

User.49362576Mar 5, 2021 4:23 PM

GE, Robert. Could you clarify if PAM continue keep NQ short hedge order (all PAM SELLS 288 CONTRACTS NQH1 AT BREACH 12,300 AS SHORT HEDGE FOR NQ LONGS (JUST IN CASE THIS SELL-OFF GOES INTO A NINTH INNING – GTC) ? Thanks.

robert.p.balanModeratorLeaderOwnerMar 5, 2021 4:24 PM

Yes, 4936 -- that is a just-in-case insurance policy.

robert.p.balanModeratorLeaderOwnerMar 5, 2021 4:33 PM

PAM BUYS BACK 144 CONTRACTS RTYH1 TO EXIT RTY SHORT HEDGES TO PROTECT LONG SCALPERS AT 2130 LIMIT OR BETTER, GTC

*This order was filled.*

*RTYH1 -- DONE AT 2129 BOUGHT BACK 144 CONTRACTS TO EXIT SHORT HEDGES PROTECTING LONG RTY SCALPERS -- ALL FUNDS*

robert.p.balanModeratorLeaderOwnerMar 5, 2021 4:43 PM

all PAM LOWERS THE THRESHOLD OF THE SHORT HEDGES FOR NQ TO BREACH OF 12,260 FROM BREACH OF 12,300 ALL FUNDS

THE HEDGE THRESHOLD JUST TOO CLOSE TO THE PREVIOUS LOW.

all PAM REINSTATES SHORT HEDGES FOR RTYH1 AT BREACH OF 2100 FOR ALL FUNDS.

all PAM LOWERS THE THRESHOLD OF THE SHORT HEDGES FOR NQ TO BREACH OF 12,260 FROM BREACH OF 12,300 ALL FUNDS

PAM had order AT BREACH 12,300 (all PAM SELLS 288 CONTRACTS NQH1 AT BREACH 12,300 AS SHORT HEDGE FOR NQ LONGS (JUST IN CASE THIS SELL-OFF GOES INTO A NINTH INNING – GTC), it was modified BREACH OF 12,310?

robert.p.balanModeratorLeaderOwnerMar 5, 2021 5:43 PM

OK -- its equities having a tantrum -- strangely, SLR issues are the remit of the bond market, but yields are rock steady. This will pass. But we have to find a way to exit or inoculate the short hedges.

Let the market bleed off its energy -- then we determine how to remove the short hedges the best way.

robert.p.balanModeratorLeaderOwnerMar 5, 2021 5:50 PM

PAM REINSTATES SHORT HEDGES FOR RTYH1 AT BREACH OF 2100 FOR ALL FUNDS

*This order was filled. *

*RTYH1 -- DONE AT 2099.25 SOLD 144 CONTRACTS RTYH1 FOR ALL FUNDS. *

robert.p.balanModeratorLeaderOwnerMar 5, 2021 5:57 PM

PAM LOWERS THE THRESHOLD OF THE SHORT HEDGES FOR NQ TO BREACH OF 12,260 FROM BREACH OF 12,300

*This order was filled.*

*NQH1 -- DONE AT 12,259.35 SOLD 288 CONTRACTS NQH1 AS SHORT HEDGE FOR NQ LONG SCALPERS -- ALL FUNDS*

robert.p.balanModeratorLeaderOwnerMar 5, 2021 6:03 PM

PAM BUYS 288 CONTRACTS NQM1 AT BREACH OF 12,920 -- TO INOCULATE THE SHORT NQ HEDGE IN CASE WE ARE UNABLE TO BREAK EVEN ON THE CURRENT NQ SHORT HEDGE. IT WILL ALSO KEEP GENERAL LONG BIAS TO EQUITIES.

*Modify to: *

all PAM BUYS 288 CONTRACTS NQM1 AT BREACH OF 12,650 (from 12,920)-- TO INOCULATE THE SHORT NQ HEDGE IN CASE WE ARE UNABLE TO BREAK EVEN ON THE CURRENT NQ SHORT HEDGE.

robert.p.balanModeratorLeaderOwnerMar 5, 2021 6:10 PM

PAM BUYS 144 CONTRACTS RTYM1 AT BREACH OF 2220, -- TO INOCULATE THE SHORT RTY HEDGE IN CASE WE ARE UNABLE TO BREAK EVEN ON THE CURRENT RTY SHORT HEDGE

*Modify to:*

all PAM BUYS 144 CONTRACTS RTYM1 AT BREACH OF 2200 (from 2220), -- TO INOCULATE THE SHORT RTY HEDGE IN CASE WE ARE UNABLE TO BREAK EVEN ON THE CURRENT RTY SHORT HEDGE

robert.p.balanModeratorLeaderOwnerMar 5, 2021 6:15 PM

Yields likely to go lower further -- that should be positive for equities in the margin. Will look for breakeven in short hedges if the market goes to test lows.

robert.p.balanModeratorLeaderOwnerMar 5, 2021 8:53 PM

all PAM BUYS *288 CONTRACTS ESM1 *SCALPERS AT BREACH OF 3825 -- ALL FUNDS

all PAM BUYS *288 CONTRACTS YMM1* SCALPERS AT BREACH OF 31,300 -- ALL FUNDS

all PAM CANCELS ALL PREVIOUS ORDERS TO GO LONG AT BREAKOUTS IN YMH1

User.49362576Mar 5, 2021 8:57 PM

Could you clarify that I understand correctly that PAM switched to June contracts in new scalp trades?

robert.p.balanModeratorLeaderOwnerMar 5, 2021 8:59 PM

Hope that's clear enough

robert.p.balanModeratorLeaderOwnerMar 5, 2021 9:12 PM

RPB gasoline and oil inventory models are showing that current oil inventory drawdowns have ended

Price is being propped up by OPEC" decision to hold off supplies until April. Watch for rampant cheating in the producers quotas.

user.52846056Mar 5, 2021 9:14 PM

What does it mean Robert, bull market start soon or vice versa?

robert.p.balan March 5, 2021 9:12 PM

RPB gasoline and oil inventory models are showing that current oil inventory drawdowns have ended

robert.p.balanModeratorLeaderOwnerMar 5, 2021 9:18 PM

Follow the trajectory of oil inventories (inverted in the chart) -- more inventories, lower oil price -- normally. But KSA just fired a shot across the bow (figuratively) of Biden's flagship.

user.52846056Mar 5, 2021 9:30 PM

Thank you

robert.p.balan March 5, 2021 9:18 PM

Follow the trajectory of oil inventories (inverted in the chart) -- more inventories, lower oil price -- normally. But KSA just fired a shot across the bow (figuratively) of Biden's flagship.

robert.p.balanModeratorLeaderOwnerMar 5, 2021 9:33 PM

PAM BUYS 288 CONTRACTS YMM1 SCALPERS AT BREACH OF 31,300 -- ALL FUNDS

*This order was filled.*

*YMM1 -- DONE AT 31,302.10 BOUGHT 288 SCALPER CONTRACTS YMM1 FOR ALL FUNDS, INCL TRACKER, EIGER*

PAM BUYS 288 CONTRACTS ESM1 SCALPERS AT BREACH OF 3825 -- ALL FUNDS

*This order was filled. *

*ESM1 -- DONE AT 3825.50 BOUGHT 288 SCALPER CONTRACTS YMM1 FOR ALL FUNDS, INCL TRACKER, EIGER*

robert.p.balanModeratorLeaderOwnerMar 5, 2021 9:40 PM

PAM BUYS 288 CONTRACTS NQM1 AT BREACH OF 12,650 (from 12,920)-- TO INOCULATE THE SHORT NQ HEDGE

*This order was filled.*

*NQM1 - DONE AT 12,652.30 BOUGHT 288 CONTRACTS TO INOCULATE THE SHORT NQ HEDGE, ALL FUNDS INCL TRACKER, EIGER*

all PAM MODIFIES THE THRESHOLD OF THE RTYM1 LONG TRADE TO 2180 (FROM 2200) GTC -- ALL FUNDS

robert.p.balanModeratorLeaderOwnerMar 5, 2021 10:20 PM

PAM MODIFIES THE THRESHOLD OF THE RTYM1 LONG TRADE TO 2180 (FROM 2200) GTC -- ALL FUNDS

*This order was filled.*

*RTYM1 -- DONE AT 2180.55 BOUGHT 144 CONTRACTS RTYM1 TO INOCULATE THE SHORT RTY HEDGE, ALL FUNDS INCL TRACKER, EIGER*

Drew.RossMar 5, 2021 9:54 PM

To hold or not to hold - through the weekend

john.derMar 5, 2021 10:25 PM

Personally, I would not. This pop today, while it feels good for bulls, looks like a nasty b-wave.

Triple.F.FredMar 5, 2021 10:57 PM

Yep, I thinned down heavily this afternoon going into the close...That is the second time I did that this week. Had a couple of good days towards the end of the week! If you are willing to be patient, there are always places you can invest that are at a compelling value... I have also learned not to fall in love with a position... Many forget that cash is also a position and one that allows great flexibility in where and how you want to go. Have a great weekend all

flytightMar 5, 2021 11:13 PM

robert.p.balan Exceptional calls today that we would go down big time, and that the yield would rise again. Impressive Robert and sooooooo helpful to me and I am sure the other members of pAM. Enjoy your weekend Mate

Triple.F.FredMar 5, 2021 11:45 PM

Imagine that happening! LOL! Great week Robert! Thanks for all you do...

freer7Mar 6, 2021 2:20 AM

Thanks Robert for your guidance, tough week. Have a restful weekend.

robert.p.balanModeratorLeaderOwnerMar 5, 2021 11:33 PM

GN everyone. See you in Asian trade Monday, March 8, 2021

------------------------------------------------------------------------------------

This is the latest performance of PAM's One-Contract Portfolio, with a margin capital of $100,000, making the same trades as the flagship Swing Fund, but doing consistent, one contract-trades.

----------------------------------------------------------------------------------------

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.

----------------------------------------------------------------