Jan. 22/24, Weekly Summary Analysis

Feb. 12, 2024

Jan. 22,  2023

Weekly Summary  Analysis


Net-transfers into the economy are significantly lower compared to last year at this time.

The stock market continues to climb despite the lower fund-flow rate.

FOMO in the herd and expectations of rate cuts may be driving the market, but potential risks remain.

Two way arrow road sign.


The market is in an interesting position; the net-transfers at both the monthly and yearly-trend are significantly lower than last year at this time:

So far in the month of January, only +$15B has been net-transferred into the economy compared to +$61B last year at this time.

For the fiscal-year so far (started Oct. 1), +$409B has been net-transferred compared to +$428B last year.

The stock market, however, continues to climb at the +$3T/year transfer rate and is refusing to drop down to the the actual fund-flow rate between +$1T and +$2T/year (chart below). At some point, this divergence will have to be reconciled; either the SPX drops like it did last year (pink arrows), or the fund-flows accelerate above last year's rate.

At the moment, it seems that the strength is coming from FOMO in the herd, since realizing they have missed an entire year of the bull market. The herd assumes that the Fed will cut rate cuts in 2024 and are still panic-buying the market. What they don't realize, however, is that if the Fed cuts rates significantly, the interest-income channel will decrease, and GDP growth will weaken...unless deficit-spending is increased to make up for the loss of interest-income. And if the Fed doesn't cut rates like they are counting on, then they will panic in the other direction and sell the market.

Another factor that could be driving the market is the $6T parked in money market funds; a rising stock market and the expectation of lower interest rates could shift some of that stash into stocks.

For now, we are happy to be 85% long and holding a small hedge position while we wait to see how the fund-flows change.

The average daily net-transfer should increase until late February (blue-arrows below) following the mid-February quarterly interest payment.


The aggregate bank credit, which has been recovering since mid-October, has dropped for the second week in a row (which reflects the seasonal weakness). All the loan types were lower except real estate loans.


Our liquidity model rose slightly during the week after falling significantly the week before.


The HY spread seems to be trending bullish (green), but the trend is not confirmed yet.


The ON lending volume is implying some weakness in the SPX (red-arrows).


The reserve model (which has not been impressing me for a while now) is in a tailwind-period until Wednesday and then a headwind-period starts.


The reverse repo model (this one does impress me) made a high two weeks ago. The SPX should make its (lagged) high in the next week or two.



The McClellan summation index is dropping, but its correlation with the SPX has turned negative (SPX continues strong) similar to May-June 2021 and 2023 (blue boxes). In both cases, the SPX continued to rally and the correlation reverted to its normal positive.


The SPX is displaying divergent strength, relative to the Hi-Lo differential, similar to last April/May (red-boxes).

Of the two possibilities (blue-arrows), the first one is working out at the moment.


The nominal put:call ratio made a down-spike in mid-December (red-oval). This correlates with a local SPX high, but for the past month the SPX has demonstrated strength that diverges from this correlation (black box below). Just a few days ago, the ratio made an up-spike (pink indication) which correlates with SPX rallies (green arrows). The underlying strength might last a little longer according to this sentiment indicator (and in agreement with the revers repo model above).



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