dChan - Q Origins Project Archive

Market Price Discovery Has Become "A Toxic Mess"-Op-Ed

have posted stuff from this pepe before, he is based.

()and bold are additions.

Market price discovery(see below this paragraph) has become a toxic mess and traders have to adapt to changing conditions. Fast. Blending an understanding of technicals with a keen awareness of the outside influencing factors on price discovery is becoming an ever more vital combination critical to success in navigating these complex markets.

What is Price Discovery?

https://www.investopedia.com/terms/p/pricediscovery.asp

continued….

The tape action, long subject to the powerful influences by central banks, computerized trading, buybacks, etc. has in 2019 increasingly become subject to the political sphere taking an overt active role in not only influencing price action, but also directly trying to drive it.

A vicious battle between reality and make belief is unfolding before our very eyes.

Over the past 10 years markets were subject to $20 trillion in global central bank intervention with many central banks still sitting on negative rates today. Just this year one can only imagine where equity prices would be without the Fed cave in January. On the buyback front one recent study suggests equity prices would be 19% lower than they are now without them.

See cap #2 on share buybacks-this is why a crash is very unlikely to occur, they own themselves through share buybacks.

This year alone we’re seeing a record near $100B per month buyback program keeping a bid under markets.

last column on cap#2.

In the first quarter political headlines of “trade optimism”, along with the price pivot known as the “Fed cave” helped drive the action relentlessly higher with overnight gap ups producing price action often times in direct contrast to underlying fundamentals.

Case in point: Semiconductors in Q1 were pushed relentlessly higher to new highs despite a clearly deteriorating fundamental picture

(cap#3 is booked semiconductor sales).

Nothing in the chart was suggesting fundamentals were improving, yet investors kept piling into the space on “trade optimism” and an easy Fed in the ill-guided belief that trade woes would only be temporary. Yet earnings reports by the likes of $INTC at the end of April woke the space up to reality.

Guided down in it's three year forward guidance…

Algos react to any news flash or tweet with vigor and can turn the intra-day price action on its head and option traders in particular can see their positions turn to dust on a single tweet.

The ‘Trump put’ saves stocks as investors bet the president won’t let the market collapse:

See this from pepe last week.

>>6514158 pb Chart that proves a POTUS 'put'.

Stocks staged a massive turnaround Friday on word from the Treasury secretary that talks between the U.S. and China were constructive, encouraging investors to believe a trade deal is still possible.

just leave munchkins…leave.

And yes, the reaction is self evident on prices, here on Friday May 10:

Part of these efforts have contributed to the magic risk free Friday effect that has pushed markets higher 80% of the time in 2019.

(witness friday afternoon when CNBS recycled an 18-hour old article about….you guessed it trade negotiations.)

…only to see these gains again disappear on another political headline in afternoon. “Trade talks have stalled“. Well duh. Tell us something we don’t know, but nevertheless algos immediately reacted to this. So be clear: Friday’s price action was once again entirely driven and dominated by the political.

(Friday was a clear-cut example as to why the humans need to be put back in control-if they had been, the reaction would most likely have been muted).

This week the news broke that interest rates on credit cards have reached 20 year highs, nearly 17%.

(why? because the system pushed out so much credit to inflate it's crappy assets it had to lower the discount rate to help out itself-this is why the yield curve is teetering on inversion on a daily basis).

As a result total interest payments have steadily ballooned higher from $265B in 2015 to already $365B in March of 2019 a 38% increase in less than 4 years.

But there’s more to it then just the Fed raising rates. What’s fascinating here is that credit card companies have been raising their rates at a much faster clip than the Fed.

Example: In 2006/7 the Fed funds rate was twice as high as it is now, but credit card rates remained in the 12-13% range:

(see cap#4)

There is a battle going on between reality and make belief and equity prices are a play thing of the 3 pillars of make belief: 1. Central banks. 2. Political jawboning and 3. Buybacks the combination making for a toxic mess in price discovery.

Technicals tell a different story, a story of reality trying to break through.

https://northmantrader.com/2019/05/19/toxic-mess/