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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (5939)	1/23/2004 12:42:09 PM
From: Lee Lichterman III	Read Replies (1) \| Respond to of 110194

Russ -Love your thread and I make it amust read every day. I have been playing around tracking the REPOs and POMOs and think I may have found something. I made a post on my site last night abou it and here is the copy paste from that. The charts to go with it are at... marketswing.com marketswing.com Here is a chart I have been playin with but haven't finished yet as I want to incorporate the Temporary float with it. Still, my theory is that POMOs are as defined, permanent injections of liquidity. As such, they should be added to the float and not go away. With this in mind, I made a running tab column so that a POMO gets added to the amount of all prior POMOs. Also, since these are generally used to just beef up reserves of banks, I applied the 9:1 multiplier ( 100,000 in fractional reserves enables 10K in reserves for a loan out of 90K to someone else, that 90k gets 9K put in reserves and then 81k gets loaned out. That 81k has 8k in reserves and 72k gets loaned out etc etc so in the end, that 100k enabled 1 million in loans thus liquidity went up 1 million) This chart shows the POMOs compiled in a running tab and then has a SPX close overlay. What I find promising is how the liquidity is goosed, then after a short time period of stability in liquidity, the market seems to surge one last time and then tops and rolls over lately. I really need to get thetemporary float added in though to see if there are any spikes or noise signals generated so right now this is just a theory that is unfinsihed in it's study. (Note the arrows are level off points and the little white flags are the delay before the rollover......... ========================================================== Additional notes to previous post - Note also how the Fed "does not target the market" (-g-) yet POMOs were a constant thing throughout the whole decline from 2000 then once the market bottomed in Sept 01, they leveled off and then were only added whenever the market started rolling over or stalled too long. Suuuure, the Fed doesn't play the market. -gggggg- As I said, the Fed gooses after down days and then slows the heroin if the market gets too giddy too fast. Note how we had a 40 billion float then soon as the DOW gained 95 points, they drained this morning. The heck with FA, the heck with TA. If you can figure out what the float will be, you know where the market is headed. Follow that fiat currency.... I think we couldn't find a correlation to the temporary reserves because we were missing the puzzle piece that was POMOs. I think the fed is playing this market like a radio trying to find a station. The POMOs are the over all level or Course adjustment and the temporary reserves are the fine tuning. He tweeks the fine tuning if he is close and varies the temporary float to hold things up, give it a goose or slow things down a little. If he starts getting too far near a limit one way or the other, he plays the POMO trump card to get the course tuning in the middle ground and then goes back to using the fine tuning or temporary reserves. From 2000 to 9-11-01, the market was dropping so fast, he was spinning that course knob every couple days until the market bottomed and now he is relying mainly on the temporary reserves and only using the course knob when the float stays above 30 too long so he can get back in that comfortable 20-25 Billion fine tune range. Just my idea of things right now. ======================= Basically the REPOs and POMOs are supposed to be a rate tool but instead are now a stock index tool. Good Luck, Lee marketswing.com