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.
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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