pebblewriter

Year: 2021

  • CPI: Still Transitory?

    Will the Fed be able to stick to their “inflation is transitory” shtick this morning?  If the financial media is any guide, there are plenty of adherents among money managers. And, why not? After all, there isn’t exactly a clear definition of what transitory inflation means. Is it elevated for 3 months? Six? A year?

    When it was just oil and gas’ base effect driving the numbers, it wasn’t that tough to argue that CPI would decline from May’s highs as we approach the end of the year. Assuming gas prices hold current levels, CPI could peak at around 4.2-4.3% and begin a decline into the end of the year. But, with labor, used cars, food, medical, etc. all joining the march higher, there is a very real risk of a much higher print and an upward price spiral that won’t unwind any time soon.

    In any case, look for stocks to finally express some doubts – depending on how broken the bond market turns out to be.

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  • Is the Snoozefest Over?

    You know when the market is in a holding pattern by how VIX behaves. For the most of the past three weeks, we’ve seen sudden collapses in VIX just ahead of the cash open. It doesn’t always last, but it’s very effective in reminding algos to smack the snooze button, “fixing” any overnight declines and sending ES back to within a few points of its all-time highs.

    Almost every day for the past several weeks, investors have turned over and gone back to sleep. But, tomorrow, we’ll get some very important CPI and claims data that could change everything.  Are investors in for a rude awakening?

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  • VIX’s Disappearing Act

    VIX’s collapse continues, putting ES within a few points of its all-time highs. At 15.15, VIX has given up nearly 50% since its May 13 highs and has reached the lowest level since Feb 20, 2020 – just before its ascent to 85.47 less than a month later.

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  • Higher Interest Rates: A Good Thing?

    Does Janet Yellen really believe higher interest rates would be beneficial?

    “If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view,” Yellen told Bloomberg News after returning from a G-7 meeting in Brussels.

    This might have been true a few years ago when the national debt was only $10-15 trillion. Approaching $30 trillion, however, it’s not as clear cut.  The next comment was the really ironic one.

    “We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade.”

    It was Yellen, of course, who with her colleagues at the Fed and former/future Fed chairs, deliberately drove interest rates to historic lows. At no point did they “fight” low interest rates. Why would she say such a thing?

    1. With inflation on the rise, it is becoming more and more expensive to pin interest rates at an absurdly low level.
    2. The Fed has painted itself into a corner, having practically exhausted the lower/longer meme and the obvious bubbles it has blown.
    3. If they can back it up with stock manipulation, shifting the narrative to higher interest rates being good could actually reassure investors – the central banker equivalent of “I meant to fall flat on my face.”

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  • Bad News is Good Again

    If yesterday’s better than expected ADP jobs data was bad news, then it stands to reason that today’s worse than expected DOL NFP print would be good for the market.  Well, that, and the 13% pounding VIX has taken…

    As it was hammered back below its SMA10, ES was ramped up above its SMA10. Funny how that works.continued for members… (more…)

  • The Fed’s Failure to Communicate

    We’ve heard the Fed’s pitches about inflation being transitory, the overriding need to keep stimulus flowing and interest rates at all-time lows, etc. But, as we witness the ongoing Gamestopification of the market, will investors be able to ignore next week’s evidence of persistent inflation that the Fed’s own actions has produced? I think they might need some new slogans.

    Futures are off moderately on – drumroll please – better than expected ADP employment and initial claims.

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  • Charts I’m Watching: Jun 2, 2021

    Futures are slightly higher ahead of the open, propped up by the usual pre-opening VIX plunge and WTI ramp job.

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  • Ten Lousy Points – From New Highs

    All ES needed was a 3-day weekend – and, another timely reversal in VIX, another timely breakout in USDJPY, and another threatened breakout by CL/RB – and here we are, 10 lousy points away from new all-time highs.

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  • Not So Fast!

    You could argue that the annual PCE print of 3.6%, the hottest since 1992, is merely a function of the base effect – last year’s crash in inflation.But that argument falls flat when you consider that MoM Core PCE, which is completely unaffected by the base effect, soared by a record 0.7%.

    Naturally, both stocks and bonds ignored the data. After all, VIX has plunged 36% in the past 7 sessions, so everything must be okay, right?

    Not so fast.

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  • What’s the Holdup?

    The Dow, the most easily and commonly manipulated index, has gone nowhere since failing to hold its 3.618 Fib extension at 34,430. It begs the question: what’s the holdup?

    Usually, when a closely followed index goes sideways for a while, it’s because an important moving average is moving into position for a backtest. But, is that the case here?

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