pebblewriter

Month: August 2020

  • Mumbo Jumbo and Chicanery

    Futures are up modestly this morning on the Dow reconfiguration chicanery and stock split mumbo jumbo. The Dow reconfiguration is, like all that have come before it, designed to do one thing: deliberately boost the current and future value of the Dow by adding winners and ditching losers.That’s why the Dow is a meaningless measure of market performance and is, at best, a signal to the wary of the games being played to portray economic health. Perfect example: the Dow’s sharp reversal on March 23 after it had fallen to its 2016 election lows.

    The stock split mumbo jumbo should be ignored altogether. Exchanging a $5 bill for 5 singles produces no net increase in value, but don’t tell the Robin Hood traders. They’re convinced that value of AAPL and TSLA has been enhanced via the maneuver.

    The thing people should be watching today is VIX which, though its 10/20 cross failed last Friday, is back for another bite of the poisoned apple.

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  • Correction Warning

    One of my favorite simple indicators of momentum shifts is the 10/20 cross. If the 10-day moving average moves above the 20-day, it indicates a bullish shift in momentum.  If it moves below, it indicates a bearish shift.

    The last time VIX experience a bullish cross was on Jun 12, whereupon ES completed a 300-pt plunge. The subsequent bearish cross on July 2 ushered in a 400-pt meltup for stocks. Today, VIX will experience a bullish cross again. With most of our indicators agreeing, we should finally get that backtest we’ve been expecting. continued for members… (more…)

  • Just Another Thursday…

    Another Thursday, another million filing for unemployment.

    Hopefully news of Jeff Bezos’ net worth topping $200 billion will take some of the sting out of being unemployed.

    As usual, the futures couldn’t care less, preferring to focus instead on whether or not the Fed will keep refilling the punch bowl following its virtual Jackson Hole shindig.It’s not as though jobs don’t matter, but…VIX.All indications are that the Fed will revise its inflation policy to “average inflation targeting,” meaning that it will allow inflation to run above its 2% target following periods where it has run below 2%.  This is somewhat analogous to my new policy of dating supermodels only after going more than a month without.

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  • Update on AUDUSD: Aug 26, 2020

    After a long, dry spell, I’ve had several requests this week for charts for AUDUSD.  Given the USD’s weakness of late, this seems like a good time to dust off some very old charts.

    In April 2017, we noted that the pair was at important support – its SMA200. If it held, it was in a position to break out of a falling channel. If not…

    …should it drop through the SMA200 at .7546, I would not want to be long at all.  There’s plenty of downside potential, starting with .6584 – the .886 Fib retracement of the rise from .6006 in Oct 2008 to 1.1079 in July 2011.  Should .6584 fail, the October 2008 lows are all that stand in the way of a test of .5493 – the .886 Fib retracement of the rise from .4775 in Apr 2001 to 1.1079.

    Then, I pretty much forgot about AUDUSD…until this week.  Funny how things turned out.  The pair spent over a year bouncing back and forth across the SMA200 until finally breaking down for the last time in April 2018.

    From there, it was all downhill until Mar 19, 2020 where it came within .0015 (0.3%) of the .5493 target.

    Should we care that it has bounced back to potential overhead resistance?

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  • Update on COMP: Aug 26, 2020

    It’s been only two weeks since our last update on COMP in which we pointed out COMP might be running out of upside. In that time, the index popped up to an even more compelling reversal point.

    Due to its age, the rising white channel that dates back to 2009 is subject to a little wiggle room. What’s not subject to error, though, is the 2.618 Fibonacci extension at 11643.40.

    Today, COMP reached the intersection of that Fib and the white channel top – a strong sell signal for an index that seems to have forgotten how to decline.The thing is…it’s not the only sell signal our charts are giving us.

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  • Durable Goods’ Big Beat

    July Durable Goods orders came in at 11.2% versus 4.8% expected, driven largely by jumps in autos and defense spending.

    YoY, orders are still down 5%.Futures are up slightly on the news, propped up by VIX’s 15% drop from yesterday’s highs and tempered by the question of how the Fed will receive the positive economic news.

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  • Update on AAPL: Aug 25, 2020

    As the leader of the band, AAPL’s ascent has been critically important to the broader markets’ performance. It has more than tripled since tagging our 144 target in Dec 2018. So, what does it mean that AAPL reached potentially important resistance yesterday?At the very least, it should help ES backtest its February highs. But, what if AAPL really stumbles as consumer confidence continues to slump?

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  • Charts I’m Watching: Aug 24, 2020

    ES is finally joining the new-highs party, zipping up past its February highs after bouncing on the white channel midline again… …prompted by AAPL topping $500/share and splitting (don’t tell anyone, but it’s also tagging overhead Fib resistance.)continued for members… (more…)

  • Why Argue?

    Futures tagged our white channel midline target again overnight… …before bouncing when VIX reversed for the third time at trend line resistance.Note that ES’ white channel midline was first topped back on March 25. Since then, it has been tested 12 times. Clearly, someone thinks it’s pretty important. Who am I to argue?

    All I know is that with interest rates and inflation suddenly on everyone’s radar, oil and gas are out of the equity-propping game. The dollar is bouncing today, but has broken down below some very long-term trends. So, USDJPY should be of little help.

    Even the Fed has watered down its enthusiasm for driving the market higher now that it’s back to February’s highs. The unspoken message to the politicians: we got it back to previous highs, it’s your turn now.

    So, aside from the usual VIX games, there’s not a whole lot to propel stocks higher. So, will the midline continue to hold?

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  • Changes in Attitudes

    It’s those changes in latitudes,
    changes in attitudes nothing remains quite the same.
    With all of our running and all of our cunning,
    If we couldn’t laugh, we would all go insane.
    ~Jimmy Buffett

    As expected, yesterday’s Fed minutes disappointed and the market was none too pleased. Turns out the Fed isn’t quite as optimistic as the market; or, maybe they just feel like they’ve done enough in driving stocks back to their February highs.

    ES came within a few points of our initial downside target before beginning its obligatory bounce.

    With initial and continuing jobless claims coming in higher than expected and Philadelphia Fed coming in below expectations, the futures are under additional pressure and should test important support.

    Should that support fail, our six-month forecast becomes more ominous.

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