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You probably didn't notice this when you woke up this morning, but there's something very special - and more than a little bit sinister - about today, April 19.
You see, today is as good as it gets for the stock market. It's likely downhill from here.
Why? Well, since March 29, the U.S. Treasury has been paying down debt - and pouring $114 billion of its cash hoard back into the market in the process.
That's over as of today, Thursday, April 19, 2018. From here on, Treasury supply will just keep building and building... while the liquidity needed to drive stocks higher dries up.
That's not good news for stocks, and that means there's only a week or two left to get my recommendations for what comes next...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Here's the Sordid Truth About This Cash Buildup
Remember the buildup of the Treasury's $500 billion rainy day fund? The Treasury Borrowing Advisory Committee (TBAC) has long recommended that the Treasury build such a fund.
The Treasury has been working toward that goal, and by March 29, it had socked away $334 billion... but it's taken a little detour since.
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As of April 12, the fund had dropped $114 billion, down to $225 billion.
If you watch the liquidity flow like a hawk, like me, it's obvious that the Treasury used that cash to pay down debt, which then had the effect of goosing stock prices.
Was it intentional? I'll let you be the judge.
But just note that at the end of March, the stock market was threatening to break down. Then - voilà! - the Treasury's hand, the magic hand with the stinky fingers, appeared.
But from April 19 until the end of May, the TBAC forecast calls for approximately $125 billion in new supply.
This will add to the pressure from the U.S. Federal Reserve siphoning $30 billion a month from the system under its balance sheet "normalization" program.
Remember, in the bad old days of quantitative easing (QE), the Fed printed and pumped enough money into primary dealer accounts to fund every dollar of new Treasury supply.
Today, it's not only funding zero new supply, it's actually taking money out of the system and forcing the Treasury to borrow even more to raise the cash to pay off the paper that the Fed is redeeming.
At the same time, the Treasury may return to padding its cash account toward the goal of reaching a $500 billion cash kitty.
If this happens, it will be a bearish development. I'll keep an eye on that data to see how that's going. There's no guarantee, of course. U.S. Treasury Secretary Steven Mnuchin is a Wall Street wiseguy, and, apparently, he likes to use that cash hoard to mess with the market.
This business of the U.S. government manipulating markets is just so sordid, and its effects on regular investors like you and me could ultimately be nothing less than tragic.
And remember: Today is as good as it gets.
Get ready for much more volatile times as the bear comes out to stretch its legs and get comfortable.
Now, I've prepared some must-see charts to get folks through the other side of the decreasing liquidity-versus-mushrooming-debt equation.
You can catch these charts here on Money Morning later this week, but I want to share them first with my Sure Money subscribers, so that the recommendations for what to do about this mess go in the right context.
The good news is, Sure Money is absolutely free. All the charts, all the tracking, all the analysis, and all the recommendations are totally gratis. So to see these charts immediately and get my investing recommendations, and, best of all, get three free Sure Money briefings a week, all you need to do is click right here.
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About the Author
Financial Analyst, 50-year charting expert, finance + real estate pro, and market analyst; published and edited the Wall Street Examiner since 2000.