pebblewriter

Month: September 2020

  • Retail Sales’ Big Miss

    It turns out that the American consumer isn’t quite as healthy as many pundits believed.  August retail sales came in at a 0.6% MoM increase versus 1.0% expectations, and July’s 1.2% spike was revised down to 0.9%.  Congress could even take action…if the market tanks.

    As expected USDJPY has now joined the robust list of factors showing a bearish 10/20 cross. All eyes now turn to the Fed.  Can it save us from the horrors of a market which fails to rally every single day?

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  • Charts I’m Watching: Sep 15, 2020

    The great thing about channels is that they tell you quite precisely when a trend change has occurred. The falling white channel seen on ES was tested just prior to the open yesterday. A simple smackdown on VIX and it was off to the races.

    As we noted at the time, ES’ 10-DMA had dropped to the level of its 20-DMA. Despite a huge ramp job, a bearish cross has indeed occurred.

    On the other hand, we have both an FOMC meeting and OPEX this week.  On top of the bullish channel breakout, these events seldom fail to produce a rally.

    Which will prevail?

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  • What Could Go Wrong?

    The week is kicking off with a 75-pt ramp job from yesterday’s lows and will feature both a Fed meeting and OPEX. Oh, and VIX gapped down last night. What could go wrong?

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  • Inflation Tops Estimates…Again

    Let’s talk about inflation. At 0.4%, both headline and core handily beat consensus of 0.3% and 0.2%. Why?

    This morning’s CPI release is a treasure trove of information regarding price action in the general economy.  On an annual basis, energy tanked and food soared. MoM, food was still strong while energy and used cars soared in value.

    So far, the market isn’t concerned. It should be.

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  • Core PPI Tops Estimates

    Maybe the Fed had it right, leaving the door open to higher inflation. Though August headline PPI came in slightly higher than expected at 0.3% vs 0.2%, core PPI rose 0.4% versus 0.2% expected.

    S&P futures sold off 8 points on the news, but the algos had other ideas. As is often the case, “someone” hammered VIX and it tumbled back below its 200-DMA at 8:39. The algos were only too happy to oblige, breaking ES out of its latest falling channel.

    Honestly, who needs economic data? Why not just have the Fed trading desk announce the day’s high, low and close every morning?

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  • Was That All?

    S&P 500 futures have bounced 77 points off their 50-DMA overnight lows, a substantial sum but not yet enough to break out of ES’ falling wedge which would be tested at 3380-3385.

    It raises the question: is this a garden variety pause or is the excitement over?

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  • Stocks: Back to Reality

    S&P futures are off a little over 4% since our Correction Warning post on Aug 28. As it turned out, we were slightly early. ES didn’t top out until three sessions later in spite of the multiple warning signs we detailed at the time. Most significantly, ES/SPX both broke down below their Feb 20 highs on Friday. While SPX bounced back above its, ES has plunged back below its in the pre-market.

    This potential backtest represents a critical level of support and will determine the course of the market and, likely, the outcome of the presidential election.

    The bigger disruption, of course, has been in the Nasdaq. COMP plunged 9.9% from its Sep 2 highs to Friday’s lows and is set to decline further this morning.

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  • Having Fun Yet?

    Stocks nailed our second downside target from last Friday [see: Correction Warning.] Judging from the financial press, it was a shock to the average investor.  It’s sad that a 4.5% correction would warrant such concern. But, as I often say, that’s the world in which we’re living.

    Bulls need February’s highs to hold, while bears are rooting for the algos to follow the direction offered by currencies and bonds.

    Many Robin Hood traders and newbie option “investors” are no doubt wondering why they didn’t pick up a good book instead of plunging into the market. These are indeed difficult times.

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  • Dire Straits

    After a couple of days of VIX rising while stocks spiked higher, it only makes sense that VIX is falling while stocks are tumbling. This is the bizzaro world in which we’re living.

    Unless it bounces sharply on our channel bottom target today, add CL to the list of algo drivers which have experienced a bearish (for stocks) 10/20 cross. It has been in a bullish alignment since May 11.

    Recall that RB crossed on Tuesday and USDJPY crossed on Aug 27. Despite the administration’s insistence that everything is peachy, the evidence is building that the market will finally take notice of the economy’s dire straits.

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  • DXY: “I Got Better”

    RBOB has joined VIX and USDJPY in a bearish 10/20 cross, adding slightly to the likelihood of a downturn. Yet, DXY’s breakdown reversed itself overnight on reversals in both EURUSD and USDJPY, meaning that there are still plenty of tricks up this market’s sleeves. Speaking of tricks, President Trump rolled out an EO forestalling evictions which, though it will likely prove difficult if not impossible to enforce, is very popular with the algos. There is arguably no limit to the EOs, Fed and Treasury actions and Congressional bills which are all calculated to improve election odds. So, how is the dollar still standing?

    It reminds me of my favorite Monty Python and the Holy Grail moment – John Cleese’s miraculous recovery from being turned into a newt.

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