Liquid Distortion

In what appears to be a developing impulse pattern, I mentioned on Twitter last Friday that I have a stop at 1755.47. I still do.

Futures were on a wild ride last night, up 10 points before cascading back down. Such gyrations feel as though the market is starting to have some issues.

The 1778 target is within sight and should be hit in the next few days. After that is where things will get interesting.

This chart was posted on Twitter by Tracy Alloway of the FT (a must follow). It's a chart of JP Morgan's proprietary measure of excess liquidity in the financial system. It's scary. It shows how the 1995 breakout occurred, how the market rallied in '03 after the tech flameout, and how it also rallied after the crash of 2007-2008. It was excess liquidity. How did it get there? The Fed. Who's adding now? The Fed. Fed up yet?

 I wonder where the markets would be priced without the Fed distorting them. This chart is hard to refute.

It also suggests a melt up is now possible whether we like it or not.

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Speaking of distortion, Lou Reed died. He went for a final walk on the wild ride. I wish him well.