pebblewriter

Month: June 2020

  • Q2: Good Riddance

    It’s not that Q2 hasn’t been kind to investors. The S&P 500 is still up 39% from its March 23 lows (40% for the Dow, 49% for COMP.) But, it’s impossible to ignore how stocks got here and wonder whether they’ll continue to dance with the forces that brought them. Moreover, what happens if the Fed decides it’s done enough for now and the music stops?

    As we discussed yesterday, the bearish charts and downside indicators are piling up. And, of course, big rallies produce meaningful rebalancing that could offset the usual end-of-quarter algo-driven meltup. The next few days will be most interesting.

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  • Charts I’m Watching: Jun 29, 2020

    Futures are up modestly this morning as we glide into the quarter end on a holiday-shortened, low-volume week.  VIX’s triangle perfectly illustrates the technical picture: attempts to break out have been beaten back, while threats to break down have routinely been rebuffed.

    It’s exactly what one would expect when the goal is to maintain positive numbers for the quarter – in the midst of a horrid fundamental backdrop. It’s hard not to look ahead to July, when the calendar offers less support.

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  • Update on Bonds: Jun 26, 2020

    Futures tested the important 2.618 Fib extension four times since yesterday’s close, bailing on the upper bound of a rising wedge with the last tag. This is a bearish pattern which, combined with numerous other bearish charts, still signals elevated risk.

    But, we’ve been beating that drum for a while. Today, I’ll focus on the bond market which continues to send its own signals of potential downside ahead. After an extended bounce, the 10Y broke trend ever so slightly just yesterday. What does this mean for bonds and for stocks?  Hint: bonds still matter.

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  • Danger Ahead

    Today is a very important day in the markets. The signals that prompted us to short on several days ago are still intact, and more have joined their ranks – the most notable being the breakdown in the 10Y flag pattern.

    ES snuck down and tagged our SMA200 target overnight. To put things simply: If it doesn’t hold, all hell will break loose.There are any number of fundamental reasons for the market to tank, including the spikes in coronavirus cases in many states. Some governors, such as Texas’ Abbott, are even copping to how disastrous the situation has become.Working to prevent a meltdown, of course, are the algo strategies which have been so effective since Mar 23. It should be an interesting next few days.

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  • Another Day, Another Test

    As we slowly make our way toward the end of Q2, we continue to see tests of important support. They are usually followed by sharp bounces despite the growing evidence that a selloff is right around the corner.Will today be the day the market finally takes the plunge?

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  • Oh Yeah, the China Trade Deal…

    When does “it’s over” mean it’s not over?  When the market plunges 65 points, of course.

    The 2% hiccup came when Fox’s Martha MacCallum asked Trump advisor Peter Navarro whether John Bolton’s claims that Trump delayed imposing sanctions on China over its policy of interning Uighur Muslims would jeopardize the China trade deal. Navarro, fresh off accusing China of deliberately seeding the virus in the US by sending “over hundreds of thousands of Chinese citizens here to spread [it] around…” didn’t equivocate.

    “Do you think that the president — he obviously really wanted to hang on to this trade deal as much as possible and he wanted them [China] to make good on the promises because there had been progress made on that trade deal,” MacCallum told Navarro. “But given everything that’s happened … is that over?”

    “It’s over,” Navarro responded.

    ES quickly plunged below its SMA10 and 2.618 Fib, but was promptly rescued by a plunge in VIX and spikes in CL and USDJPY which, not so coincidentally, popped back above its SMA10.

    In all the turmoil over 9.2 million sickened and 475,000 killed by COVID-19, the ongoing social unrest, and an economy which is arguably teetering, it’s sometimes easy to forget the China trade deal and the months during which the market took its cues from the daily press briefings and chopper talk quips about how magnificently negotiations were going.

    With the White House amping up its rhetoric over China’s culpability for the pandemic, I imagine Navarro’s initial assessment was the honest one.

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  • Charts I’m Watching: Jun 22, 2020

    Futures are off slightly this morning as ES has backtested the channel it meant to break out of on OPEX Friday.  Today marks the beginning of the last seven sessions until the end of Q2 – traditionally a period of flat or rising prices.

    Can the seasonal trend offset the growing list of bearish fundamental and technical factors?

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  • Quad Witching Friday

    It would be unusual in normal times for stocks to drop on OPEX or a Quad Witching Friday. Given the massive stimulus inflating the markets, these are far from normal times.

    ES broke out of the falling channel it’s been in since June 10, primarily on the VIX breakdown and oil breakout we’ve been expecting. The big question, given that we have a quarter end coming up, is how far equities will go.

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  • The Holding Pattern

    Futures are heading for another test of the 2.618 Fib extension at 3076.93, the fourth since last pushing above it on Monday.

    There are numerous targets below, but that would mean cooperation from the algos – a rare commodity these days. The bearish case, however, is growing stronger every day.

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  • Powell: A Translation

    My two favorite Powell quotes from yesterday’s senate testimony:  “I don’t see us wanting to run through the bond market like an elephant snuffling out price signals and things like that” and “We want to be there if things turn bad in the economy or if things go in a negative direction.”

    Without question, the Fed has snuffed out price signals in service of keeping “things” from going in a negative direction. Translation: we have and will continue to manipulate bond yields (and currencies, volatility and oil prices) whenever necessary to prevent (1) yields that would otherwise spike higher from bankrupting the country; and, (2) stocks from falling.

    Look for more of the same doublespeak today.

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