Congratulations! You’ve completed the “Beginner’s Guide to Global Liquidity” course.
This is your operational cheat sheet, the same type of metrics that many institutional macro portfolio managers monitor.
How to use this guide:
- Bookmark this page.
- Check it every Monday morning (10 minutes).
- Answer the 4 key questions in Section 7.
- Use Section 8 to determine your positioning
What you’ll find:
✅ The indicators (what to check)
✅ The thresholds (what the numbers mean)
✅ The interpretation rules (what’s happening)
✅ Trade implications (what to do)
1. Treasury Liquidity Indicators
SOFR vs IORB Spread
What you’re checking: Is overnight lending stressed?
Signal: Funding stress when SOFR > IORB
| Condition | Interpretation | Action |
|---|---|---|
| SOFR < IORB | Stable funding | Maintain baseline positioning |
| SOFR = IORB | Early stress | Add hedges |
| SOFR > IORB for 2+ days | Repo stress emerging | Expect liquidity injection |
| SOFR > IORB for 5+ days | High risk of basis-trade deleveraging | Short equities tactically; long gold/BTC |
Where to check: Federal Reserve Bank of New York (daily at 8:30 AM ET)
🔑 Key insight: When SOFR rises above IORB, banks are desperate for cash. It’s a warning that Fed intervention may be needed.
Standing Repo Facility (SRF) Usage
What you’re checking: Are banks using the Fed’s emergency lending backstop?
Why this matters: The most important real-time signal for repo market stress.
| SRF Level | Interpretation | Action |
|---|---|---|
| < $10B | Normal | Neutral |
| $10–50B | Stress brewing | Start layering in gold/BTC |
| > $50B | Treasury dysfunction phase | Prepare for Fed/Treasury rescue |
| Spike then collapse | Liquidity injection succeeded | Go long risk assets |
Where to check: Federal Reserve Bank of New York (daily at 8:30 AM ET)
🔑 Key insight: SRF usage spikes when the repo market is clogged. When it suddenly collapses, the Fed’s intervention worked. It’s probably time to buy risk assets.
2. Treasury General Account (TGA)
What you’re checking: Is the government adding or draining liquidity from markets?
Why this matters: When TGA goes down, money enters markets. When it goes up, money leaves.
| TGA Level | Interpretation |
|---|---|
| < $400B | Liquidity entering markets |
| $400B–$800B | Neutral |
| > $800B | Liquidity drain; repo tightening risk |
| > $1T | High probability of SOFR spike |
Where to check: U.S. Treasury Department or FRED (search “WDTGAL“)
Critical Rule:
If TGA ↑ AND SOFR ↑, markets enter the danger zone.
Translation: Government draining liquidity + banks scrambling for cash = Major stress ahead! Unless the Fed intervenes.
3. Equities and Interest Rates Relationship
What you’re checking: Are stocks and bonds moving in unusual patterns?
Why this matters: This is the “Doom Loop Detector” when both stocks AND bonds fall together, the Treasury market is breaking.
| Pattern | Meaning |
|---|---|
| Stocks ↑ + Yields ↑ | Normal reflation (healthy economy) |
| Stocks ↓ + Yields ↓ | Normal risk-off (flight to safety) |
| Stocks ↓ + Yields ↑ | Treasury dysfunction → liquidity incoming |
Where to check: Google “SPX” for stocks, “10-year treasury yield” for bonds
Action when the doom loop appears:
Go long gold and/or BTC.
🔑 Key insight: When stocks fall but Treasury yields RISE (bonds also selling off), something is broken. The Fed will have to inject massive liquidity.
4. Dollar Trend
What you’re checking: Is the dollar strengthening or weakening?
Why this matters: Dollar direction tells you if global liquidity is expanding or contracting.
- Falling dollar = Money flowing into risk assets.
- Rising dollar = Money fleeing to safety.
- Both DXY and yields rising = Foreign selling, major problems.
The Four DXY Patterns
| Pattern | What It Means | What You See | Action |
|---|---|---|---|
| DXY ↓ (Falling) | Liquidity expansion, risk-on | Stocks/gold/BTC/commodities rising | Stay fully invested, maximum risk |
| DXY ↑ (Rising) | Global stress, risk-off | Stocks/EM falling, flight to safety | Reduce risk 20-30%, hold cash |
| DXY ↑ + Yields ↑ | Foreign selling Treasuries (DANGER) | EM crisis, bonds selling off | Maximum defense, 40-50% cash |
| DXY ↓ + Gold ↑ | Policy-driven dollar weakening | Gold rallying, real assets outperforming | Maximize real assets (gold 20-30%, BTC 10-15%) |
Where to check: Google “DXY” or use TradingView
How to Read DXY Charts
- Trend over 2-3 months: Higher highs/lows = strengthening; Lower highs/lows = weakening.
- Magnitude: 2-3% move = normal fluctuation; 5-7% = significant trend; 10%+ = major shift.
- Key levels: Breaking below 100 after being above 105 = potential regime change; Breaking above 110 = extreme stress.
The Dollar Smile Theory
The dollar strengthens during both crisis AND strong US growth, but weakens during recovery:
- Left side (Crisis): Dollar rises on fear → Be defensive.
- Bottom (Recovery): Dollar falls as liquidity expands → Be aggressive with risk.
- Right side (Late Cycle): Dollar rises as Fed tightens → Start trimming risk.
5. Gold & Bitcoin Confirmation Signals
What you’re checking: Are real assets confirming your liquidity analysis?
Why this matters: Gold and bitcoin act as “second opinions” that validate or challenge your primary indicators.
Gold
| Pattern | What It Means |
|---|---|
| Gold ↑ while DXY ↓ | Policy-induced dollar weakening (bullish) |
| Gold ↑ while yields ↑ | Foreign reserve rotation → structural shift (very bullish for gold) |
| Gold ↑ + SRF ↑ | Treasury stress → liquidity incoming (Fed rescue imminent) |
Bitcoin
| Pattern | What It Means |
|---|---|
| BTC ↑ during TGA ↑ | Stablecoin-driven liquidity (crypto-native demand) |
| BTC ↑ during gold ↑ | Neutral-collateral bid (alternatives to the financial system) |
| BTC ↑ + DXY ↓ | Global liquidity expansion wave (perfect storm for BTC) |
Where to check: Google “gold price” and “bitcoin price”
🔑 Key insight: When BOTH gold and bitcoin are rising together while DXY falls, you have maximum liquidity expansion. Be aggressive with risk assets.
6. M2 Money Supply (Long-Term Indicator)
What you’re checking: Is the broad money supply expanding or contracting?
Why this matters: M2 is your long-term strategic indicator. It predicts inflation 12-18 months ahead and stock markets 6-12 months ahead.
What Is M2?
M2 measures all readily available money: cash, checking accounts, savings deposits, small CDs (<$100K), and retail money market funds. Current US M2: ~$22 trillion.
M2 Growth Thresholds
| M2 YoY Growth | Interpretation | Implication |
|---|---|---|
| >15% | Extreme expansion | Expect high inflation in 12-18 months |
| >10% | Rapid expansion | Expect inflation; position for real assets |
| 5-7% | Healthy/sustainable | Normal growth environment |
| <5% | Below trend | Watch for slowdown |
| Flat or negative | Contraction | Expect disinflation/deflation; recession risk |
The Critical Lag
- M2 → Inflation: 12-18 months
- M2 → Stock markets: 6-12 months
- M2 → Bitcoin: 70-107 days (highest sensitivity)
Historical proof: M2 peaked at 27% YoY in February 2021 → CPI peaked at 9.1% in June 2022 (exactly 16 months later).
M2 + Balance Sheet Combination Matrix
| M2 Growth | Balance Sheet | Positioning | Logic |
|---|---|---|---|
| >10% YoY | Expanding | 🚀 Maximum risk-on | Double tailwind |
| >10% YoY | Contracting | 🟡 Selective risk | Mixed signals, favor long-term |
| 5-7% YoY | Expanding | 🟢 Moderate risk-on | Healthy growth |
| 5-7% YoY | Contracting | 🟠 Cautious | Neutral conditions |
| <5% or negative | Expanding | 🟡 Selective | Short-term boost, long-term concern |
| <5% or negative | Contracting | 🔴 Maximum defense | Double headwind |
Strategic Allocation by M2
When M2 >10% YoY:
- Overweight growth stocks, tech, small-caps.
- Accumulate bitcoin and crypto.
- Build commodity positions ahead of inflation.
- Underweight long-term bonds.
- Minimize cash (being debased).
When M2 5-7% YoY:
- Balanced allocation.
- Focus on fundamentals and valuations.
When M2 is flat or negative:
- Reduce stocks, favor quality/value.
- Minimal crypto exposure.
- Overweight bonds (yields falling).
- Higher cash allocation.
Where to check: FRED series “M2SL” or Federal Reserve H.6 release
7. Weekly Synthesis Framework
Your Monday Morning Checklist (Answer These 4 Questions):
1. Is liquidity entering or leaving?
Check: TGA direction, SRF usage, SOFR level
- Entering: TGA falling, SRF low, SOFR stable
- Leaving: TGA rising, SRF elevated, SOFR rising
2. Is the dollar strengthening or weakening?
Check: DXY trend over the past month
- Weakening (DXY ↓): Risk-on environment
- Strengthening (DXY ↑): Risk-off environment
3. Is Treasury dysfunction present?
Check: Are stocks falling AND yields rising at the same time?
- No: Normal market behavior
- Yes (for 3+ days): Doom loop—Fed intervention coming
4. Are real assets confirming?
Check: Gold and Bitcoin price action
- Both rising: Confirms liquidity expansion
- Both falling: Confirms risk-off
- Mixed: Check which signal is stronger
Your Monthly Check (Fourth Tuesday):
5. What is M2 telling you about the next 6-18 months?
- 10%: Position for inflation and real assets.
- 5-7%: Normal conditions.
- <5% or negative: Position defensively, favor bonds.
8. Action Playbook
Use this section to determine your portfolio positioning based on what you see in sections 1-6.
Regime 1: Bullish Liquidity (Base Case)
You see:
- TGA ↓ (falling)
- SRF low (< $10B)
- SOFR stable (< IORB)
- DXY drifting down
- Gold/BTC trending up
What it means: Money is flowing into markets. This is the “easy money” environment.
Your actions:
- ✅ Long gold (15-20% of portfolio)
- ✅ Long BTC (10-15% if comfortable with volatility)
- ✅ Long equities (60-70%, especially tech/growth)
- ✅ Curve steepeners (advanced—or just own gold/BTC)
- ✅ Long TIPS (inflation-protected bonds)
Position sizing: Maximum risk-on
For FX traders: Short USD across the board (especially vs commodity currencies)
Regime 2: Treasury Dysfunction
You see:
- Stocks ↓
- Yields ↑
- SOFR ↑
- SRF ↑
What it means: The plumbing is breaking. Fed rescue is coming.
Phase 1: Before Liquidity Injection
Your actions:
- ❌ Short equities (or reduce to 30-40%)
- ✅ Long volatility (VIX calls or protective puts)
- ✅ Long USD vs weak EM currencies
- ✅ Start accumulating gold (5-10%)
- 💰 Hold 30-40% cash
Position sizing: Maximum defense
Phase 2: After Liquidity Injection
When: Fed announces emergency measures, SRF usage collapses
Your actions:
- ✅ Long gold (20-30%)
- ✅ Long BTC (15-20%)
- ✅ Long equities aggressively (especially tech)
- ✅ Steepeners (or just ride the gold/BTC wave)
Position sizing: Aggressive risk-on
For FX traders: Flip from long USD to short USD.
Regime 3: Geopolitical/Monetary Fracture
You see:
- Gold ↑ strongly (new all-time highs)
- BTC is volatile but upward trending
- DXY choppy (no clear trend)
- EM FX bifurcation (some currencies strong, others weak)
What it means: The global monetary system is shifting. De-dollarization accelerating.
Your actions:
- ✅ Overweight gold (25-30%—this is the main event)
- ✅ Overweight BTC (15-20%)
- ✅ Overweight resource exporters (commodity producers)
- ❌ Underweight long-duration nominal assets (avoid long-term bonds)
- ✅ Long commodity FX (CAD, AUD, NZD)
Position sizing: Heavy on real assets, light on financial assets.
For FX traders: Focus on commodity currencies vs USD, avoid long-term USD positioning.
Regime 4: DXY Rising + Yields Rising (Foreign Selling Crisis)
You see:
- DXY ↑ (strong rally)
- Treasury yields ↑ (bonds selling off)
- EM currencies plunging
- Global deleveraging
What it means: Foreign central banks are selling Treasuries to defend their currencies. Toxic combination.
Your actions:
- ❌ Reduce stocks to 30-40%
- ✅ Gold as insurance (15-20%)
- ✅ Hold cash/dollars (40-50%)
- ❌ Avoid all international exposure
- ✅ Short-term Treasury bills only (not long-term bonds)
Position sizing: Maximum defense
Quick Decision Matrix
Use this table to quickly determine which regime you’re in:
| TGA | SRF | SOFR | DXY | Gold | BTC | Regime | Action |
|---|---|---|---|---|---|---|---|
| ↓ | Low | Stable | ↓ | ↑ | ↑ | Bullish Liquidity | Max risk-on |
| ↑ | High | ↑ | Any | Any | Any | Treasury Dysfunction | Defensive → Prepare to buy |
| Any | Any | Any | Choppy | ↑↑ | ↑ | Monetary Fracture | Heavy gold/BTC |
| ↑ | Rising | ↑ | ↑ | ↓ | ↓ | Liquidity Drain | Maximum defense |
DXY Confirmation Matrix
| DXY Direction | Gold | SOFR | Interpretation | Action |
|---|---|---|---|---|
| ↓ Falling | ↑ Rising | Stable | 🚀 Bullish liquidity | Maximum risk |
| ↓ Falling | → Flat | Stable | 🟢 Normal risk-on | Stay invested |
| ↑ Rising | ↓ Falling | Stable | 🟡 Normal risk-off | Reduce risk |
| ↑ Rising | ↑ Rising | Stable | 🤔 Mixed—watch closely | Neutral, favor gold |
| ↑ Rising | → Any | ↑ Rising | 🚨 Crisis mode | Maximum defense |
| ↓ Falling | ↑ Rising | ↑ Rising | 🟠 Stress + printing | Gold/BTC heavy |
Tips for Using This Dashboard
1. Check weekly, not daily
- Monday mornings work best.
- Takes 10 minutes once you have bookmarks set up.
- Daily checking leads to overtrading.
2. Focus on trends, not single data points
- One day of SOFR > IORB = Watch
- Three days = Take action
- Five days = Red alert
3. Wait for confirmation
- Don’t act on one indicator alone.
- Look for 2-3 signals pointing in the same direction.
- Gold/BTC should confirm your liquidity read.
4. Position sizing is everything
- Don’t go all-in or all-out.
- Adjust by 10-20% increments.
- Keep some cash for opportunities.
5. The Fed rescue trade is the big one
- Spot: SRF spiking + Doom loop forming.
- Position: Buy gold, prepare cash.
- Execute: Buy aggressively when the Fed announces.
- This pattern has worked for 30+ years.
6. For forex traders specifically
- Dollar liquidity drives all USD pairs.
- Use the TGA direction as your DXY bias.
- SOFR spikes = DXY spikes (then reversal).
- Liquidity expansion = Short USD opportunity.
7. Use M2 for strategic, not tactical decisions
- The 12-18 month lag means M2 is for positioning, not timing.
- Combine M2 (strategic) with balance sheet/SOFR (tactical).
- Don’t expect immediate market response to M2 changes.
Common Mistakes to Avoid
❌ Fighting the trend: Don’t buy stocks when all signals say defensive.
❌ Waiting too long: Fed interventions bottom markets fast. Be ready!
❌ Ignoring the TGA: It’s an underrated indicator.
❌ All-or-nothing: Gradual position changes work better.
❌ Checking too often: Weekly is enough, daily causes noise.
❌ Forgetting confirmation: Always check if gold/BTC agrees with your thesis.
Your Bookmark List
Set these up once, check them as indicated:
Weekly (Monday Morning):
- SOFR: NY Fed SOFR Rates
- IORB: Federal Reserve Policy Tools
- SRF: Google “FRED SRF” or NY Fed daily operations
- TGA: Google “FRED WDTGAL”
- DXY: Google “DXY”
- Gold/Bitcoin: Google “gold price” and “bitcoin price”
- 10Y Yield: Google “10-year treasury yield”
- S&P 500: Google “SPX”
Monthly (Fourth Tuesday, 1:00 PM ET):
- M2: FRED series “M2SL“
- Fed H.6 Release
Global M2 (Monthly):
Final Reminders
✅ This is a monitoring system, not a prediction system!
✅ You’re observing liquidity flows and positioning accordingly.
✅ The Fed will always rescue Treasury market dysfunction—that’s your edge.
✅ Liquidity expansion = Buy risk assets.
✅ Liquidity contraction = Reduce risk.
✅ Crisis → Fed rescue = Biggest opportunity!
✅ Dollar falling = Money flowing into risk assets.
✅ Dollar rising = Money flowing to safety.
✅ DXY + Yields both rising = Foreign selling, maximum defense.
✅ DXY falling + Gold rising = Policy debasement, load up on real assets!
✅ M2 predicts inflation 12-18 months ahead. Use it for strategic positioning.
✅ M2 >10% = inflation coming; M2 negative = deflation/recession risk.
Stay disciplined. The signals work because you follow them consistently, not because you cherry-pick when to listen.
Print this page. Bookmark it. Check it every Monday (and the fourth Tuesday for M2).