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(March 15, 2021): DXY May Make One More Lower Low; Fed Likely To Extend SLR Provision Moratorium For Another 6 Months At Least

Mar. 16, 2021 4:36 PM ET1 Comment
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Summary

  • The last long equity trades were exited with some profits and some at breakeven, as we gear up for the pre-FOMC meeting doldrums. Playing percentage trades as market seeks direction.
  • 10Yr Yield has one more rally ahead of the FOMC decision, as to complete the current five-wave sequence, but there is no way of telling how equities respond to that.
  • NFIB data turns inflationary, but Core CPI lags that data by one year. Therefore, US/global yields may bottom only by May-June 2021 period. Therefore, DXY makes one more lower low.
  • You have to be careful about the timing of using long US Dollar (DXY) trades as hedges for a commodity-heavy portfolio. There may be one more dip in the US Dollar (DXY). The Dollar is inversely "mapped" to the Global GDP (nominal), as global yields (nominal) may yet make a trough (probably by May-June 2021). So time the bottom of the Dollar (and the top of the commodities) exquisitely. See the provided chart below.
  • Markets are at ATH, it's not in Fed's best interest in market of public opinion to goose this market on. However, they might throw the Primary Dealers a bone, and agree to extend the suspension some provisions of the SLR -- that does not take too much energy and unsettle anyone (probably except the FDIC) -- SLR is universally hated by the PDs, especially the 8 US G-SIBs. We believe the Fed will agree to extend the SLR moratorium for at least another 6 months. But there will be none of that YCC stuff which will just complicate the market situation.

MARCH 15, 2021

GOOD MORNING ASIA / GOOD EVENING EAST COAST

robert.p.balanModeratorLeaderOwnerMar 15, 2021 2:22 AM

PAM BUYS 288 SCALPER CONTRACTS OF ESM1 AT BREACH OF 3940, GTC

*This order was filled.*

*ESM1 -- DONE AT 3940.60 BOUGHT 288 CONTRACTS ESM1, FOR ALL FUNDS*

freer7Mar 15, 2021 12:08 AM

China Becomes First Major Economy to Start Withdrawing Pandemic Stimulus Efforts

As its economy rebounds, Beijing begins a delicate process that will influence the domestic and global recoveries

robert.p.balanMar 15, 2021 2:05 AM

*THERE GOES THE COMMODITY BULL PHASE.*

freer7 -- Robert, what do you think of Nordea's call on huge infl surprise in Q2 based on NFIB data (6m lead) aided further by Biden's stimmy chq directly into consumers and SMEs, which is inflationary?

Yes, these are inflationary, but CPI lags behind these data by a year (see chart below).

freer7Mar 15, 2021 2:21 AM

Much thanks!

freer7Mar 15, 2021 2:27 AM

Vaccine Elation Will Lead to the Market's Fall, BofA Sage Warns | Chief Investment Officer

The S&P 500’s happy days are numbered, with investors blind to Washington overreach, says Michael Hartnett.

freer7Mar 15, 2021 5:21 AM

China central bank rolls over 100 billion yuan of medium-term loans, keeps rate unchanged for 11th month

SHANGHAI - China's central bank on Monday injected medium-term loans into the banking system while keeping the interest rate unchanged for an 11th straight month.

robert.p.balanModeratorLeaderMar 15, 2021 11:07 AM

Albert.Food -- "What is the best way to hedge a portfolio with commodity heavy exposure? Long DXY?"

Yes, absolutely. But you have to be careful about the timing. There may be one more dip in the US Dollar (DXY). The Dollar is inversely "mapped" to the Global GDP (nominal), as global yields (nominal) may yet make a trough (probably by May-June 2021). So time the bottom of the Dollar (and the top of the commodities) exquisitely. I will tell you when to do it -- just remind me occasionally to apprise you.

robert.p.balanModeratorLeader

Mar 15, 2021 1:07 PM

*"Biden giveth, and Biden taketh away"*

_*Biden Plans Biggest Federal Tax Hike Since 1993 To Fund Infrastructure, Climate Initiatives*_

Biden Plans Biggest Federal Tax Hike Since 1993 To Fund Infrastructure, Climate Initiatives

The overall program has yet to be unveiled. Nevertheless, analysts are penciling in between $2 trillion to $4 trillion

*THERE GOES THE EQUITY BULL MARKET*

*Chinese Markets Slump Despite Soaring Industrial Production, Retail Sales*

*_(It was just the frigging base-effect!)_*

Chinese Markets Slump Despite Soaring Industrial Production, Retail Sales

China's economic activity data showed strong acceleration in year-over-year terms on a very favorable base effect.

robert.p.balanModeratorLeaderOwnerMar 15, 2021 4:20 AM

robert.p.balanModeratorLeaderOwnerMar 15, 2021 4:27 AM

*We put a trail stop to this long YMM1 scalper trade. *

all PAM EXITS 288 LONG YMM1 SCALPERS (BOT AT 32,513) AT DOWNWARD BREACH OF 32,600, GTC -- FOR ALL FUNDS

robert.p.balanModeratorLeaderOwnerMar 15, 2021 11:25 AM

We think that the 10Yr Yield has at least one more rally ahead of the FOMC decision to make to complete the current five-wave sequence, and there is no way of knowing how the equities will respond to that.

So we start putting trail stops to the long equity positions so as not to lose money on those which are already showing enough daylight between acquisition cost and current market price.

*We put a trail stop to this long RTY overhedge position.*

robert.p.balanModeratorLeaderOwnerMar 15, 2021 11:28 AM

all PAM EXITS 300 LONG RTYM1 (BOT AT 2345.25) AT DOWNWARD BREACH OF 2346 (BREAKEVEN), GTC -- FOR ALL FUNDS, EXCEPT TRACKER AND EIGER

The 10yr yield is just about to resume a rally, and so the new long ESM1 scalpers could be hammered.

all PAM gets out of the long ESM1 scalpers temporarily, and reinstate when the yield's rally is done. XXX DISCRETION, ALL FUNDS

*This order was filled. *

*ESM1 -- DONE AT 3941 (BREAKEVEN) -- SOLD 288 CONTRACTS TO EXIT LONG ESM1 SCALPERS, FOR ALL FUNDS*

robert.p.balanModeratorLeaderOwnerMar 15, 2021 12:30 PM

PAM EXITS 288 LONG YMM1 SCALPERS (BOT AT 32,513) AT DOWNWARD BREACH OF 32,600, GTC

*Modify to:*

all PAM EXITS 288 LONG YMM1 SCALPERS (BOT AT 32,513) AT DOWNWARD BREACH OF 32,750 (FROM 32,600), GTC -- ALL FUNDS

robert.p.balanModeratorLeaderOwnerMar 15, 2021 12:35 PM

PAM EXITS 300 LONG RTYM1 (BOT AT 2345.25) AT DOWNWARD BREACH OF 2346 (BREAKEVEN), GTC

*This order was filled.*

*RTYM1 -- DONE AT 2345.70 (BREAKEVEN) SOLD 300 CONTRACTS TO EXIT LONG RTYM1 OVERHEDGE, ALL FUNDS EXCEPT TRACKER. EIGER

engbilMar 15, 2021 1:44 PM

I read this on bar chart.com and others were talking about. Could this impact yields further

T-notes were under pressure Friday on signs of massive liquidation of Treasury holdings by bond dealers ahead of a regulatory deadline. Federal Reserve data released late Thursday showed Treasury holdings at primary dealers dropped by a record $64.7 billion to $185.8 billion in the week through March 3, the lowest in 3 years. Bond dealers and banks are liquidating their Treasury holdings before the expiration of a regulatory exemption on March 31.

Since April 2020, when the Fed instituted some of its pandemic crisis measures, banks have been allowed to exclude Treasuries and reserves when calculating their supplementary leverage ratio. This allowed them to hold more Treasuries than they otherwise may have done. BMO Capital Markets estimates that unless the exemption is extended past March 31, there could be an additional $200 billion in Treasury bond selling.

robert.p.balanModeratorLeaderOwnerMar 15, 2021 1:33 PM

PAM EXITS 288 LONG YMM1 SCALPERS (BOT AT 32,513) AT DOWNWARD BREACH OF 32,750 (FROM 32,600), GTC

*This order was filled.*

*YMM1 -- DONE AT 32,749.35 SOLD 288 CONTRACTS TO EXIT LONG YMM1 SCALPERS, FOR ALL FUNDS

robert.p.balanModeratorLeaderOwnerMar 15, 2021 1:52 PM

OK, yield is probably consolidating sideways, but we dodged that sell-off, which could go deeper still if yields continue to rise. Negative covariance comes back intermittently, which makes it difficult to time entries and exit into and out of equity trades.

We are very glad to be out of that long YM scalper trade. Mr. B&H DMed me back saying it was a correct decision to exit the scalper longs. (Thank you, sir!).

That is why we are playing a percentage game with the trades.

RM13Mar 15, 2021 3:50 PM

Robert, I think Powell will disappoint the markets on Wed, I think the Fed knows full well that since there is lower treasury issuance in Q2 2021, they don't have to do anything drastic with rising yields - and that will unsettle the markets. We need to go to ATH on SPY on Wednesday to sustain the move up, it's on the fed now..

ptTL9Mar 15, 2021 5:16 PM

RM13 do you think Powell does not know it's on fed now? I bet he does

RM13Mar 15, 2021 6:04 PM

Markets are at ATH, it's not in Fed's best interest in market of public opinion to goose this market on. Happy to hear others opines...

robert.p.balanMar 15, 2021 6:31 PM

Fully agree with you Rafa -- that is why I am so skittish with the long trades.

However, they might throw the PDs a bone, and agree to extend the suspension of the SLR -- that does not take too much energy and unsettle anyone (probably except the PDIC) -- SLR is universally hated by the PDs, especially the 8 US G-SIBs. We believe the Fed will agree to extend the SLR moratorium on some provisions for at least another 6 months. But there will be none of that YCC stuff which will just complicate the market situation.

Scott007Mar 15, 2021 6:52 PM

Should be interesting

RM13Mar 15, 2021 7:03 PM

Thank you for that insight Robert, If Fed extends SLR deadline by 6-12 months, that would cause a short term rally, in both equities and treasuries...

john.derMar 15, 2021 4:28 PM

Bonds going up, stocks going down.

zak.kMar 15, 2021 4:31 PM

Are we looking at a double-top on ES: Feb 15 and Mar 11? Hourly RSI is looking weak.

LowerlightbebeamingMar 15, 2021 5:55 PM

For those inclined to gamble, I share this advice:

"You got to know when to hold them, know when to fold them, know when to walk away and know when to run. You never count your money when you're sitting at the table. There'll be time enough for counting when the dealing is done." Kenny Roger.

paradigmMar 15, 2021 6:20 PM

Thank you Beam for your counsel to stay focused on price and structure, and for posting your detailed charts.

surfinusaMar 15, 2021 8:33 PM

So far, today's low on VIX was 20.16 .

bogeygolfMar 15, 2021 8:54 PM

I read the banks are holding onto the stimulus checks until 17th because of the SLR issue, in order to put pressure on the Fed. Does anybody know if this is real or fake news?

surfinusaMar 15, 2021 8:55 PM

VIX open gap @ 19.98 from Feb 12, now filled. (lod 19.94)

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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.

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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:

February 2021 spreadsheet here:

Year to date 2020 spreadsheet here.

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