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[Recently I wrote here that the world's biggest financial institutions are in Evergrande muck up to their eyeballs, even if they claim that their exposure is small in relation to their respective assets. The trouble is, the supposed assets are as ethereal as Evergrande's grotesquely inflated real estate holdings. In the guest commentary below, Shawn Brown, a San Francisco friend from the hedge fund world, raises the possibility that behind-the-scenes maneuvering by the Fed is attempting to shore up the financial system ahead of potentially massive Evergrande shock-waves that have yet to be felt.  RA ] Who are the 80 Participating Counterparties in the daily $1 Tr+ Reverse Repurchase Facility, and why are almost half of the Primary Dealers foreign?  It appears Chinese real estate developer Evergrande is going to stiff offshore creditors in a proposed restructuring designed to zombify the property giant.  Is this a dry run for the Fed’s rapidly approaching hyper-hypothecated Treasuries moment? Friday, approximately 50 unidentified counterparties had their access to daily RRP doubled from $80 Billion to $160 billion.  According to  ADVRatings.com, only seven banks in the world have a market cap greater than $160 billion, and four of them are, dubiously, Chinese.  Former NY Fed, IMF and U.S. Department of the Treasury employee Zoltan Pozsar says the counterparties are “sterilizing reserves.”  If that’s true, the Fed is about to unleash a literal tsunami of liquidity (perhaps up to $5T) heading into fiscal year end to back-stop the Evergrande contagion and subsequent flight to safety. A Hypothecation Problem The Fed has a serious hypothecation problem, and it is also the reason they’re talking taper: everyone is quickly realizing Evergrande collateral is about to take a 50%+ haircut.  The Fed continues to throw shade with terms like "accommodative," "full employment," "low inflation," "climate change," Covid --

Bertie has been too dull lately to deserve the top spot in the 'touts'  list, but it has found its way there nonetheless because of a quirk in my publishing tool that I did not foresee when I published the latest updates later than usual on a Sunday. Be that as it may, this vehicle is still generating some excellent trading opportunities, mostly with 'mechanical' entries. The one shown is a textbook inversion that tripped a buy signal on the September 10 pullback to the green line. A somewhat riskier buy signal would occur on a retracement now to p=46,180.  The stop-loss would be at 45,177.  I suggest paper-trading this one unless you know what you're doing. The D target at 49,371 can be used similarly. ______ UPDATE (Sep 20, 12:23 p.m.): Evergrande has sucked the speculative juices from even the hardiest lunatic vehicles, including this one. The 'risky' mechanical trade got crushed, along with the bullish reverse ABC pattern that had informed it. Bitcoin will continue to lead stock-market rallies, but keep in mind that these will be bear rallies, presumably offering us opportunities that will differ from what we've seen over the last decade.

Usually, violent swings make for profitable 'mechanical' trading. In this case, however, the ride south has been marked by heavy chop that's made trading an obvious downtrend as difficult as surfing in a storm. DIA has triggered just one legitimate short along the C-D leg  -- but from the red line rather than the less risky place at the green one where we typically jump aboard.  I am still looking for a tradeable if temporary upturn from around 340, which would be well within the discomfort zone that has cued up so many of our trades in recent months.  As noted here earlier, this gambit will require an rABC-type entry recommended only for those who are familiar with the tactic. _____ UPDATE (Sep 20, 12:52 p.m.): Sellers have pushed DIA well below 340, implying that the next place we might look for a 'discomfort-zone' low would be in the range 335.15-337.40 (visually estimated). if you understand why, I would encourage you to attempt the trade. Here's a graph to help you visualize the set-up. ______ UPDATE (Sep 20, 10:04): The trade worked, but because it entailed an especially  challenging entry and only one subscriber reported doing it, I have not established a tracking position. Now let's see if the little bugger can make it up into to the gap between 342.16 and 345.31. _______ UPDATE (Sep 21, 10:34 p.m.): The little bugger's rally failed near the middle of the gap, setting up a nice 'discomfort zone' short for any Pivoteer who was eager to trade. The subsequent downtrend projects to at least 336.90 (60-min, a= 342.16 at 10:30 a.m. on 9/20 , b=335.99 and c=343.07. _______ UPDATE (Sep 22, 9:36 p.m.): The rally had shorts mildly on the run at the close. It also negated the short-term bearish pattern, albeit

Bears had a rare chance to get short with impunity last week -- arguably the first such free-money opportunity since the bull market began more than 12 years ago. With the Evergrande saga unfolding in real time, shares appeared to be doing a Wile E. Coyote ahead of Friday's opening. Their gravity-defying behavior reflected one of those deft manipulations where DaBoyz greet whatever fragile bids show up in the early going with a feather-light touch. On Friday, playing it by the book, they scaled back their offers until the very last of the idiots from Mars doing the  buying were fully satisfied. The result was that stocks hovered aloft for just long enough that traders who had gotten things exactly right -- i.e., realized that Evergrande's failure could make the 1998 collapse of Long-Term Capital Management look like a furniture-store liquidation -- must have begun to doubt themselves. It was only after the opening bell that they came to their senses with the apparent realization that any selling done on Friday was all but certain to look fortuitous come Sunday evening.  Stocks began to fall, but not nearly as steeply as they are likely to fall in the days, weeks and months ahead. Indeed, I am publishing this commentary ahead of Sunday's resumption in trading to drive home my point, which is this: Evergrande's imminent implosion could turn out to be the biggest speculative collapse in history. It is going to take down many big players, causing a chain reaction that will definitively end the buying mania that has gripped shares since Covid-19's "bullish" failure to put civilization into eclipse. Up to Their Eyeballs For now, don't believe talking-heads blather about how Black Rock, Goldman Sachs et al. hold only relatively small stakes in Evergrande.  The truth is, when you

I've been drum-rolling the 382.75 bull-market target for so long that I'm hardly surprised to see QQQ rolling down after making an actual high within a quark of it at 382.72. Nor will I be shocked if Friday's weakness turns into something truly hellish. From a prediction standpoint, the pattern stood to be a good and especially useful one because it is fairly gnarly, and therefore less visible to the herd; and because the droolers and algos who have finally caught on to the magic of ABCD patterns are unlikely to have used the idiosyncratic, one-off 'A' that is the Hidden Pivot Method's secret sauce.  For now, let's simply watch and enjoy the show, keeping our fingers crossed that we are witnessing the massive coronary that alone can return the stock market to reality and a chance for better health.  If you own put butterflies as advised, or naked puts from the top, cash out half as always if and when they double in price.

The weekend brought an autumnal breeze to much of the Eastern Seaboard, and with it raised hopes in some quarters that seasonality will trigger a long overdue avalanche in the stock market. Even a few bulls are hoping for this, since only a rip-snorting stampede out of shares can disperse the potentially explosive, hydrogen-saturated layers of hubris that have accumulated over Wall Street since stocks bolted into the blue 18 months ago. The astounding rally during a global pandemic has made the rich effortlessly richer while doing little to help the broad middle class. It has also undeservedly burnished the reputation of portfolio managers who have done little more than throw Other People's Money at a relative handful of stocks. They've been winning like crazy for more than a decade, so who could blame them for believing their amazing run of luck will continue forever? Of course that's the way things always feel at important tops, even if the Wall Street Journal and other cheer-leaders for investors' salacious fantasies will try their hardest to explain why this time it really is different. Love that Kamala! Most of us know better and can smell a top that is becoming increasingly pungent with each fresh instance of unsettling, if not to say appalling, news. The President's steepening mental decline, for one. The New York Times, the Washington Post and even the Wall Street Journal  will somehow find things to like about Kamala Harris when it's time to cheer her on, but there's no pretending she'll be any more effective than Biden.  And there's the delta variant, a contagion so robust that it could conceivably put the world into a second lockdown that will make the first seem like a global street festival. You could always argue that the market has become completely

China is easy to hate, since their leadership is at heart a bunch of double-dealing, lying commie rats. (And yes, the evidence is more than a little persuasive not only that they unleashed a deadly virus on the world, but that they took clandestine steps to protect themselves from it before going public with the bad news). There is nonetheless something to admire and even envy in the way China's leaders have been going about economic reform. For starters, Xi Jinping has declared war on tech companies perceived as having little to contribute to China's goal of economic, geopolitical, financial and cultural dominance. Not coincidentally, most of the targeted companies are in the same businesses as America's hottest firms: consumer goods, advertising, real estate, ride-sharing, finance, gaming and entertainment. Xi's denying Chinese firms in these sectors access to U.S. capital markets is akin to Biden's issuing a fatwah against glorified ad agencies like Google and Facebook, banning Twitter for incitement and casting out the moneylenders at Morgan Stanley. The CCP's clean-up campaign took an interesting -- some might say promising -- turn last week when they banned effeminate men from TV. It remains to be seen how a generation of children will fare in the relative absence of yin-saturated popular culture, but if it eventually produces a Chinese John Wayne, the West will face an even tougher adversary down the road. Terminal-Stage Consumerism It's not simply a matter of targeting the kinds of companies we associate with America's terminal-stage consumerism, income inequality and decadence. The CCP's reforms are also designed to shift investment capital toward industries positioned to provide a brighter economic future for the Chinese people, and to grow an economically robust middle class. This policy implicitly rejects and rebukes an American-style capitalism that has atrophied to the point

Bertie took off after I pulled the 'mechanical' bid at the green line, rebuking me for the unpardonable sin of gutlessness. Even so, I won't start the new week feeling remorseful, since this vehicle has been very good to us whenever we've employed 'mechanical' bids on nasty pullbacks. This one simply wasn't nasty enough or we'd have elected the trade. Looking just ahead, bulls will face supply of geometrically increasing density above 50,000, although that will only slow the rally down somewhat, not reverse it decisively. 'Mechanical' buying opportunities are spent for the time being, although a pullback to the red line after p2=50,875 has been touched (but not exceeded by much) could be bought with a 46,953 stop-loss and a target at D=53,228. _______ UPDATE (Sep 2, 8:01 p.m.): The yo-yos and algos seem to be working "our" HP levels to death. Look at how studiously Bertie has avoided touching every line relevant to what would have become winning 'mechanical' trades. (We passed up one such trade ourselves when a pullback missed the green line by a millimeter on Aug 26). I am going to have to be more careful about whom I admit to the Wednesday tutorial sessions, since I don't want Goldman and Morgan Stanley riff-raff learning how we keep two steps ahead of their trading computers and math whizzes. _______ UPDATE (Sep 7, 10:01 p.m.): No sooner do I mention that the wack-jobs who flog this hoax have "figured out" ABCD levels and begun to use them ineffectually, than it dives 19% in the blink of an eye from within an inch of a too-clear 'D' target they'd fallen in love with. The news-media geniuses who pretend to make sense of such things embarrassed themselves as usual with an account that tied the plunge to El

In the Trading Room on Friday, "Statman" spotlighted a breakout in this vehicle, waking me from a long slumber. His breakout indicator probably differs from mine, since I'm focused on an intraday high that exceeded mid-July's 226.81 'external' peak by all of 22 cents, or about a tenth of one percent.  But a breakout is a breakout, and so I've redrawn the chart to show what could happen if IWM is in fact beginning a big move in a very sneaky way. You can butterfly one-month calls near the 245 strike if that is your style, but we'll also look for intraday opportunities to board the underlying, provided there is a good show of interest in the chat room. (If you are new to Rick's Picks and butterfly spreads, use your account dashboard to access a free recorded lesson on how to do these spreads in our idiosyncratic, super-leveraged way.) _______ UPDATE (Sep 7, 10:06 p.m.): So far, price action has been garbage, with no even remotely interesting buying opportunities in more than a week._______ UPDATE (Sep 8, 9:02 p.m.): I've lost interest in attempting a 'mechanical' buy if IWM returns to  x=217.06, since it would amount to 'sloppy fifths'.