Well, I hope it was all worth it. What was? The Fed whoring itself out to market pressure once again of course. Throwing in that totally unnecessary 3rd rate cut. But they have to keep appeasing the beast they have created.

“Hawkish rate cut” was the initial take by many news outlets. Please. That notion was not even real to begin with but went out the water completely when Jay Powell offered the odds of a rate hike to be equivalent in probability of WeWork actually being worth $20B.

Firstly it’s the wrong take on substance. What’s hawkish about any of this?

In less than 30 days during October the Fed has:

– Introduced a $60B per month treasury bill buying program
– Increased its just in September launched daily repo facility from $75B to $120B
– Cut rates for the 3rd time in 4 months

They are not pausing anything.

— Sven Henrich (@NorthmanTrader) October 30, 2019

I submit nothing. It’s full balls intervention mode.

Jay Powell has no clue when or if ever there will be a rate hike. Judging from his construed answer he hadn’t even thought about it. And why would he? The entire rate hike construct from last year has blown up in the Fed’s face, the entire world is cutting rates and there is no one, anywhere, that has any clue when central banks will ever raise rates again. It would require a massive change in inflation Powell said. Oh great, so never then as the Fed has been chasing its inflation target for 10 years always falling short. The ECB? Forget it. Inflation expectations keep dropping hence more negative rates.

And it was precisely this admission of rate hike impotence that caused the sudden shift in internals yesterday:

And if you think that comment didn’t matter to markets look at what happened to internals right then and there.. pic.twitter.com/eVTOXBW1FE

— Sven Henrich (@NorthmanTrader) October 30, 2019

Voila, new highs on mediocre internals at best.

And so we’re left with this reality to ponder:

The next global recession will be come with the world in more debt than ever with central banks already in the policy gutter having had to intervene for over 10 years to just keep the balls in the air.
How will all this play out?
The undiscovered country.

— Sven Henrich (@NorthmanTrader) October 31, 2019

Is that really bullish? Or is it terrifying?

At least one may inquire if it is really confidence inspiring that the Chair of the Federal Reserve who went from boldly projecting rate hikes just  10 months ago has now been reduced to cutting rates 3 times instead without having a single clue when he will ever raise rates again?

So was it all worth it? We can’t know the answer yet, but we can observe the charts and, for now, the general proclamations of a market breakout fall woefully short on many indices on this month end close.

Examples:

Small caps still showing lower highs since May of this year:

Transports, well, chop:

Banking sector, perhaps encouraging for bulls here is a slight breakout, and perhaps a successful retest today, but it’s far from convincing as of yet:

And the $DJIA, perhaps the best thing that can be said is that it closed above the October 2018 highs today, 13 months after fact by virtue of a little ramp at close today:

Still lower highs since July.

And even $SPX. The July high was 3028. Today markets closed at 3037. Big whoop. Perhaps the best that can be said is that it closed above the July highs. By 9 handles.

Fact is this month’s new highs, once again coming on easy central bank money, have yet again shown a lower high on the value line geometric index:

Maybe that will change still, but considering all that intervention, all that stimulus, all that artificial liquidity, where is the big grand bull market breakout that everybody is talking about? For now it appears to be a launch failure. But fear not, the Fed keeps injecting liquidity every day, maybe one day soon it will be finally enough. Billions and billions of dollars in repo ($120B facility),  ‘not QE’ in treasury bills buying at $60B per month and now 3 rate cuts. Because that’s precisely what you do when you’re confident in your outlook of stable growth.

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