As we discussed, given the technical setup and the historically high broad market valuation, things were setup for a technical correction.

 

But we've since had a few pro-liquidity shots across the bow (pro-liquidity = pro-asset prices). 

 

Last Friday morning the Fed Vice Chair, John Williams, was in Europe doing a keynote at a European Central Bank conference on money markets. 

 

Just a week after the Fed ended quantitative tightening, he signaled to markets that the Fed would be increasing the balance sheet again in the near future, as part of its (don't call it QE) "reserve management" framework.

 

Later on Friday, Fed governor Miran (Trump's guy) gave a speech on the impact of stablecoins on Treasury demand (higher) and the neutral interest rate (lower). 

 

This coming structural increase in the demand for short-term Treasurys (estimated in the $1-$3 trillion range) behaves like QE — as Miran said, "may increase the supply of loanable funds in the U.S. economy."

 

Finally, on the fiscal side, Trump floated the idea of $2,000 "tariff dividend" checks today. 

 

This seems like it was directed at the Supreme Court, to apply additional pressure on their decision about the legality of the tariff policies.  Trump is effectively promising the American people the money that the Supreme Court might rule needs to be returned to sender.  Nonetheless, the market is now contemplating the impact of government checks on asset prices and consumption.

 

With all of this, the trend break in stocks was short-lived, for now.

 

More on the Fed Vice Chair's speech …

 

This speech was about averting another 2019 shock event.

 

Remember, back in 2018-2019, the Fed spent eighteen months shrinking the balance sheet, draining liquidity from the financial system, and they created a cash crunch (a scramble for dollars in the interbank lending market).