Monday, September 25, 2017

SPX Update, and a Few Words on the Fed

Well, as we all know, last week Janet Yellen announced that's she's actually Janet Reno in disguise, and that the Fed will finally begin to attempt to unwind its paltry $4.5 trillion balance sheet, starting in October.  This weekend, Janet Reno/Yellen discussed a few additional details on the unwind, giving us a glimpse into what the Fed will be rolling off first. 

In order, below is Janet's list of the "first items to go":

1.  The Fed will begin by unloading an undisclosed percentage of its massive Beanie Baby collection, which it began purchasing in the 90's as a stop-gap to the Great Beanie Baby Collapse.  The program was originally intended to simply bail out a handful of banks who were overweight in the previously-skyrocketing Beanie Baby Sector, but it eventually expanded to include some of the largest private collectors, including Ben Bernanke.  Expect to see Beanie Babies regularly appearing for auction on the Fed's eBay account ("TheFerReal-USFed-ReserveYo").

2.  In December, the Fed plans to let a number of assets mature and roll off by simply not reinvesting with Bernie Madoff.

3.  In 2018, the Fed will be selling off William Shatner's kidney stone, which they purchased as part of QE 2 and have been holding in a special humidity-controlled vault ever since.  The vault alone has been costing taxpayers nearly $2.8 billion per month, so this is a bigger step than it looks at first glance.

Janet ReYellen stated that she's confident they can find at least a few other areas to "trim the Fed's fat" as time goes on, and she may possibly even consider parting with the Fed's original cut of Andy Warhol's Empire.

In other news, the market continues to trade.  As has become tradition for Friday sessions, this most recent Friday session was held on a Friday -- so that meant there were options expiring somewhere in the Universe, which meant that the market wasn't allowed to do anything other than grind around in a circle, as if it were Miley Cyrus and she had just lost an eye.

Accordingly, there's not a ton to add to last Friday's update, except to note the reaction to the lower red trend line that was already on the chart:

In conclusion, there's not much to add to the prior update, but I will throw my hat in the ring and say that I do suspect Friday's low will be broken in reasonably short order, because it looks very much like a B-wave.  That may simply end up being wave C of blue 4, but there's always a chance it will turn out to be something more significant.  Of course if we sustain a breakout over the all-time-high instead, then it's possible the most recent correction was a double zigzag (I have that as an alternate possibility instead of the B-wave).  Trade safe.

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