A Market Full Of Gaps

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A Market Full Of Gaps

Authored by Sven Henrich via NorthmanTrader.com,

The bubble keeps on bubbling, the never ending rally keeps on rallying and the charts keep getting ever more dangerously stretched.

Intra-day price discovery is virtually absent as volatility remains woefully compressed and $SPX barely moves.

It’s become quite the scene to watch an index representing 500 stocks with a combined market cap of $27 trillion “trade” in a 0.1% price range for hours on end:


Worse, the price advance action is mostly driven by up gaps that rarely if ever fill and market open ramps that settle into tight price ranges during the day.

While Fed critics are dismissed as QE conspiracists, we can either choose to be believe the Fed or our own lying eyes as the repo machine continues to execute relentlessly:

Open gaps in markets are not unusual, some stay open for weeks, months, even years. Some may never fill.

But it is when you get gap after gap after gap that the action becomes incredulous and challenges conventional market wisdom. I’ve seen 3 or 4 unfilled gaps in a short time frame, I’ve even seen 5, but I can’t recall seeing anything like this:

That’s the $SPY since not QE which is now widely acknowledged to be quasi QE. Count the unfilled gaps.

And here, for granularity, here’s the $SPX since just December:

Resistance is futile if you can just gap above it and never actually have any price discovery in between. It is impressive to say that this market finds support on top of each gap each time, but I suppose extraordinary liquidity measures produce extraordinary results.

But don’t take my criticisms seriously. I’m just a “swashbuckling pirate QE conspiracist” according to Neel Kaskari president of the Federal Reserve Bank of Minneapolis:


My skin is plenty thick, thank you very much, but evading answers and accountability by those in power is pet peeve and when they think it’s all worth a giggle on twitter I find myself unimpressed by the institutional arrogance on display.

Fun and giggles over substance apparently:


It’s a shame and a sham really. The Fed deserves to be criticized. If it wants to claim the banner of transparency it needs to earn it, and denying reality while labeling critics as “conspiracy theorists” is just not credibility building:


Especially as parts of the Fed have already admitted it:


And the bubble blowing recognition has also now extended to the Financial Times:


Maybe they too are now pirates sailing the stormy sea of QE conspiracies. Looks like the number of pirates is increasing outside the sound proof walls of cushy Fed offices.

No, keep denying the bubble and claiming to not to see the relationships in policy and price action as you wish. But the gaps are there. And they demand filling. Not only the gaps in the charts, but also the gaps in credibility.

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Tyler Durden

Fri, 01/17/2020 – 15:17

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