Whipsawed once again by the Fed - it's time to loosen (I mean tighten) the money supply.
-NW

Nordstream Sabotage: Russia Didn't Do it, But Said They Know Who Did
BY VBL | Zero Hedge
Oct 2, 2022

[snip]

The Pivot and the Secret Fed Meeting

What is the point at which the US Fed would abandon inflation control at least temporarily and combat something breaking? That may be upon us given the UK crisis and the dwindling liquidity in US Bonds now. Stocks are closer to the first level in our Pivot criteria. The UK event certainly is something that could be bubbling under the surface here.

On Friday the Fed announced a special closed door meeting. From the website: “It is anticipated that the closed meeting of the Board of Governors of the Federal Reserve System at 11:30 a.m. on Monday, October 3, 2022, will be held under expedited procedures.”

The stated purpose is a review and determination by the Board of Governors of the advance and discount rates to be charged by the Federal Reserve Banks. Based on last week’s events in the UK and the shrinking liquidity in US Bonds and the manifestation of that in crushed stocks, it is reasonable to believe a pause to rate hikes of some sort will be coming if not a Pivot itself.

It is probably equally possible that a more targeted aid will be implemented, either to help whatever is going on underneath the surface in US markets, or to (finally) open sort of dollar swap window for the EU and the UK. Any of this would be good for stocks, bad for inflation, and bearish for the dollar.

What is not obvious is the effect on US Bonds. If Bonds rally as one would expect under a QE (or end of a QT) environment then you have business as usual. Bonds could sell off however to the extent that the help is Europe and UK focused and investors pull money out of the US and put it back on the Continent.

Worst would be the US Bond market reacting like the UK did. That would be bonds getting crushed out of fear that there are concerns of credit here as well, and that fiscal irresponsibility without tight monetary policy could cause a crisis of confidence. This last one is highly unlikely for now, and if it did happen, the Fed would keep meeting until it “fixed it” like the BOE just did their own crisis.

We have no strong opinion of which is most likely in context of how the market will react simply because stocks are getting ahead of themselves constantly now. But how the market does react to whatever they decide may tell you what to do afterwards. CTAs are very short stocks again as they are Silver and Gold now. if the news is bullish stocks you can look for an overperformance in the Silver compared to stocks as we saw last week.