Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Are corporate profits due for a retest of the lower channel line? If so, what happens to equity valuations when corporate profits plummet?
Is the U.S. economy in recession? Is it heading for recession? These questions can only be answered in hindsight, but it's worth looking for clues to what might be just ahead.
With rate-hike odds plunging for every meeting across 2016, and bond yields collapsing almost as fast as stocks, it appears the market's faith in the The Fed is faltering fast...
Crude is now down 20% since The Fed! Stocks down 7% and bonds and bullion up 2% - does that sound like The Fed's decision inspired confidence?
No - of course not. But then there's this:
Via Constantin Gurdgiev's True Economics blog,
Here's a neat summary chart based on data from BIS through June 2015, covering total global credit (debt) outstanding (excluding IMF debt), issued in three main currencies:
That savage deleveraging... it has been truly epically... unnoticeable...
Crude carnage continues and despite the best efforts of the USDJPY pumpers, US equity markets are tumbling along with oil (and copper)...
Remember when China was "fixed" overnight?
Yeah - no!
Stocks will likely rally this week for the simple reason that it is options expiration week.
The Fed almost always gives Wall Street extra money to play around with during options expiration.
· On average the Fed expands its balance sheet by $9.1 billion during options expiration weeks.
· During non-options expiration weeks, the Fed contracts its balance sheet by an average of $2.5 billion.
Below is a table of the changes in the Fed’s balance sheet. Options expiration weeks are gray.