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Fed $500 Billion Repo VS. Index's, Thoughts?

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Fed $500 Billion Repo VS. Index's, Thoughts?

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  #1 (permalink)
Chicago + IL/USA
Posts: 1 since Dec 2019
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Hey guys, new member, happy to be here! It will be nice to have a like minded community to bounce ideas off of and be a part of. Ok, back to my post...
So I have been a Bear for the past 6-months now and have been getting crushed on my options plays that would have paid off big on a correction or really big on a crash. After coming to the realization that the Fed will not let this market crash, at least for now, I am switching gears to the Bullish side for the near-term at least.
Given what the Fed committed to Repo operations (or "Not QE") earlier this week of close $500B, and how the markets have reacted since, would you guys assume it is pretty darn close to a guarantee that this pump in the indexes will continue at least up until mid-January? And if so, what do you feel if anything would or could cause a sell-off?
I dabbled a bit in E-mini ES and NQ's this week (I wish I dabbled a whole lot more), which is the first time I have gone long in a while. Just curious (or more looking for more validation) if the next few weeks are going to play out the same way as this week and I would love to hear others thoughts or perspectives either way before I start pumping up contracts. FOMO of course, but if it's pretty much a sure thing, why not get in on it and make back at least what I lost on my puts. Anyways, glad to be here, look forward to any replies and I hope this was cool as a first post.

PS: I attached a couple images that correlate to my post.

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  #3 (permalink)
Experience: Intermediate
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Our goal as traders isn't to try and predict the market. It is to react to it in a way that can benefit if it's going up, down or sideways. The problem with news articles and magazines is that they shift the focus from whats happening (e.g. reading the tape and watching the price action) to what happened (news is backward looking). You can have a high level or comprehensive discussion on macro economics and monetary policy and not make money. You can also be a low IQ trader who has their trading psychology developed enough to where they are a consistently profitable trader (CPT). Don't over think and conflate breaking news stories with what you as a trader should be focusing on. This is a separate discussion from how you may want to allocate capital of your retirement account or longer held positions.

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  #4 (permalink)
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if it's pretty much a sure thing

Be careful there ^^

Once something is established enough to be "pretty much a sure thing," it's much harder to navigate. Proceed with caution.

I would respectfully say that your past 6 months of bearishness might indicate that you should focus more on current, evidence-based data. Granted, the dips in August and October were tricky. However, in the past 2 months particularly, there's been a clear bid in the market. So, rather than predicting (as the other poster nicely mentioned), focus on gathering data, define your risk, and execute!

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  #5 (permalink)
 Trailer Guy 
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While the other responses were well written and very correct I would come at it from a different angle.

Apple is up 98% after announcing that they can not grow income and in fact revenue declined 2% over the year. Outside of the supporters who drink Apple red cool aid is there any way they can make a 40% margin taking on Disney head to head? So why did the stock double in 1 year. Tim Cook has a cash bazooka and he fired 100 billion into the market.

If you don't like my Apple analogy then exhibit 2 is We Work/Softbank. Same principle.

How much has the Fed dumped into the New York Broker Dealers this fall? Better yet how about December when they announced they were fighting the year end bank repo lock up. You can not stuff 500 billion under a mattress it has to go somewhere and it didn't fund new car loans.

No, the Fed is not the only answer but they have the biggest single cash bazooka on the street. And their policies made the roughly 700 billion in stock buybacks possible, because they made it cheep to borrow and promised a poor return on surplus funds sitting in the bank. Central Bank aggregate world wide credit creation/money printing is the single biggest long term factor in market direction over the last decade, and a significant mover over the prior 30 years.

Will it end very very badly some day? Everyone says yes but so far that has been a bad bet to make. Unless you live in Venezuela or Argentina.

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