The Fed is Hoarding Cash for a Rainy Day

Hey There Income Hunter,


Excess funds are flowing into the Fed’s reverse repo program every day with an all-time new high set this week.


You may remember the Fed creating this program to absorb the overflow of cash in the system last year. The overflow was created when the Fed was purchasing $120 billion of securities a month  from its dealer banks via quantitative easing (QE). The money mostly found its way into  the stock and bond markets. 


Well, now more money than ever is being dumped on the Fed as investors seek a safe haven for their cash in case officials tighten monetary policy more quickly than expected in the coming months. 


As you can see in the Fed graph below, there is plenty of cash ready to be deployed as the Fed hikes rates in the months ahead.



Today, I’ll show you a trade I put on yesterday and why I think it will work as the end-of-quarter approaches.


Quarter-End Stock/Bond Rebalancing


With bond prices trending lower and stocks trending higher, end-of-quarter pension fund rebalancing next week may fuel significant buying of bonds to sell stocks. 


Notice the trends of the iShare 25+ maturity Bond ETF (TLT) vs the Invesco QQQ Tech stock ETF (QQQ)  in the chart below … 




TLT Seeing Record Inflows


Over $1.5 trillion went in TLT last week supporting the deeply liquid bond ETF. Notice the TLT money flows below.



I also love the fact that the new lows in TLT were met with higher lows in RSI, which is a reliable reversal indicator. Plus, this week’s candle could also indicate a hammer reversal pattern, as well.



Bring It Home


Yesterday, I closed a nice trade in the SPDR Gold Trust ETF (GLD) for a 37% gain. I am still very bullish on the precious metals and am looking for a pullback to reset.


If you have not subscribed to Power Income Trader, you are missing out on great trades and insight into the Fed and how to front run the central bank’s policy. Call our customer care team at 1-888-872-3301 from 9 a.m. to 5 p.m. today


We are in for an incredible ride the next couple of months and my PIT system will give you a huge advantage. So come on board!


Live and Trade With passion My Friend,

Griff

William Griffo

William Griffo

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About the Author

William Griffo

William Griffo

Former CBOE floor trader and CIO at Karman Line Capital. Author of ‘The Option Traders Hedge Fund’ with over 30 years of options trading experience.

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