king to pawn 4

August 19…)

in the news

At least five grain ships have been attacked near the Russian Black Sea ports of Novorossiysk and Tuapse, - Bloomberg August 18 The war in Ukraine is one of the most undercovered developments in the world recently.

Iran has lost significant control of the Straight of Hormuz: CNN Business

Oilprice.com is reporting Aramco has sent 3 VLCCs into the Strait of Hormuz loading 6 mm bbls at Ras Tanura and Juaymah on August 12 and August 16 according to Kpler and Vortexa. KSA plans to load 6 more this month. Seven VLCCs are sitting off the coast of Oman and 2 more were being tracked to Fujairah.

in the markets

At 8:33 AM ET the U.S. Treasury released a statement saying it is increasing (at least doubling) the maximum size of its liquidity-support buyback operations for longer-dated nominal coupon securities (10- to 20-year and 20- to 30-year sectors) from $2 billion to at least $4 billion per operation. The change takes effect September 9, 2026.

There is a 2 year auction at 12:00 noon and a 1 PM 20 year auction (bid to cover under over?).

NDX futures don’t seem overly enthused about the treasury announcement but the day is young.

DOW futures spent a typically quiet evening. There is a confirmed well formed bearish divergence in my 45 day slo-stochastic. This is the second or third such divergence in Q-3, the previous 2 being overwhelmed by surges of declining volumes.

The Citadel rally noted on the chart below followed the FOMC decision on July 29. The all time high was posted on all time record high call volume on August 4 (2.4 mm calls expired worthless the next day). Open interest in DOW futures is relatively high while volume has continued to decay.

The DOW is up $200 on the announcement.

Silver rallied 4% from its overnight lows.

Basis the price on the board as I type all buyers of gold since the open interest lows in June are in credit and sellers in debit. The 200 D MA looks doable.

The yen ripped higher, an unusually sensitive response to strength in US long dated treasuries underscoring the short yen short treasury bond linked positions. All USD FX pairs are stronger, DXY accelerating lower.

In other markets… crude prices are motionless. Cracks (refining margins) are flat at all time highs. Copper is unresponsive to the Treasury announcement but in general it’s supportive. Bitcoin rallied $200.

my vibe

I was wondering what color of rabbit Bessent would pull out of his tool box to stave a spill in the stock market. The yen carry was poorly received! The only hammer that fit the nail was to hammer the short position in bonds.

Is it enough? Probably not. But YCC is now openly in the mix. If it’s inadequate, Bessent can increase it.

rock the boat!

very very chill

Short and sweet this morning. I’ll be back this evening when we have more development to ponder.

JJ

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Charts and data CQG and Bloomberg… occasional cartoons by Gary Larson

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