pebblewriter

Year: 2021

  • Inflation: A Growing Chorus

    After feeling like the lone inflation alarmist for the past few months, I find myself in the midst of a growing chorus which now recognizes the Fed’s conundrum. Building inflationary pressures are now obvious to all.

    What isn’t clear is whether the Fed’s nonchalance re rising rates is real or feigned. And, if feigned, at what point will they throw in the towel on the sales pitch that rising rates are great?

    Futures are back below yesterday’s lows and small H&S patterns have formed on both ES and VIX.

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  • Retail Sales and PPI: A Blowout

    Retail sales soared by 5.3% (vs 1.2% est.) in January. Stripping out auto sales, it was even higher at 5.9% (vs 1.0%.) The control number, which strips out food, auto sales, building material stores and gas stations, was up a whopping 6.0%.

    Note that gas receipts’ 4% MoM increase was all price change: EIA data shows a 6.3% increase from December which, at current prices, will top 7% for February.

    The PPI data was no less spectacular. January headline PPI rose 1.3% (vs. 0.4% est) and core (w/o food and energy) came in at 1.2% (vs 0.2%.)

    Futures, which were up modestly overnight, have tumbled to a TL of support at a 19-pt loss, with the SMA10 just below at 3899.42 which would provide better support. Should it not hold, we’re still looking for a backtest of the previous high at 3862.Consider that this spike in PPI has taken place with a relatively modest increase in oil and gas prices. As we’ve discussed for months now, the YoY increase will soar to over 30% in the next two months unless oil and gas prices collapse – something that is hard to fathom in the midst of the weather-related power shortages currently afflicting Texas.

    With FOMC minutes coming out later today, it will be very interesting to see how they spin this data.

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  • Update on Energy Markets: Feb 16, 2021

    Texas, the energy capital of the US, is running short of energy. The cold snap is breaking records throughout the state, with temperatures so low that many wind and water turbines are frozen and not able to produce energy. Refineries are shut down. As of last night, over 3.5 million Texans are without power.

    Not surprisingly, oil, gasoline and especially natural gas prices have shot higher.

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  • 500 Miles High

    Thinking of the late great Chick Corea this morning as I survey the sky-high equities market…  Futures have regained about half their overnight losses, spurred by a timely dip in VIX and pop in 10Y yields (testing Monday’s highs.)

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  • Powell: Let’s Get This Party Started

    Jerome Powell gave a good news/bad news speech to the Economic Club of New York. He noted that employment is still 10 million below February 2020 levels and that a broader range of unemployment would put the current rate at 10%, adding, “We are still very far from a strong labor market whose benefits are broadly shared.”

    As the algos were spinning up their sell orders, he delivered the good news upon which the market relies: “Achieving and sustaining maximum employment will require more than supportive monetary policy.” He added that it could take “many years” to overcome the effects of long-term unemployment and scoffed at the idea of problematic inflation.

    From my vantage point, he’s right and he’s wrong. The strong earnings and cheerleading from pandemic lockdown beneficiaries have drowned out the wails from the pandemic’s have-nots: those who find that even a $1,400 stimulus check won’t pay the rent, the millions of small businesses and self-employed who couldn’t qualify for PPP loans, the millions for whom unemployment  benefits are unobtainable or inadequate.

    But, make no mistake about inflation. Yesterday’s CPI data reiterates our long-held conviction that, although official core inflation is mild, actual inflation is much higher.  Even the understated official CPI will soon soar to levels not seen since before the pandemic (when 10Y yields topped 2%) unless the manufactured rebound in oil and gas prices unwinds posthaste.

    The morning after, futures have regained most of their losses and are again knocking on the door of the 1.272 Fibonacci extension……thanks primarily to yet another VIX “breakdown” from its rising channel which, as we discussed yesterday, has produced another bearish (bullish for stocks) 10/20 SMA cross.Will it be enough to offset the cold water with which Powell just drenched the reinflation trade?

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  • CPI Holds Steady…For Now

    CPI increased 0.3% MoM and 1.4% YoY in January – buoyed by a 7.4% increase in the price of gasoline which almost single-handedly accounted for the 3.5% monthly increase in energy prices.  Without food and energy to bolster it, core CPI was unchanged in January and showed a 1.4% increase YoY.

    The Fed has its work cut out for it. Energy prices are still down YoY, but that is about to change dramatically when the March-April price plunge is factored in. As we’ve discussed many times, the data points to a surge in CPI to well over 2% unless gas prices correct substantially in the coming months. Futures spurted slightly higher, not on the CPI data……but in response to the signals VIX continues to send the algos. Every dip below the white channel bottom has resulted in a new high for ES.continued for members… (more…)

  • Charts I’m Watching: Feb 9, 2021

    Futures are off modestly as the algos have backed off their assorted breakouts and breakdowns now that the bearish H&S Pattern has been busted.continued for members… (more…)

  • BTC: Musk’s Plus One

    See if you can spot the point at which TSLA disclosed its purchase of $1.5 billion in BTC.

    Yes, in a world where seemingly everything is making new highs, BTC joins the party – courtesy of Elon Musk.

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  • Mission Accomplished

    In another obvious show of how easily this market can be manipulated, ES’ final bearish Head & Shoulders Pattern was busted in the final five minutes of trading yesterday. This morning, SPX’s H&S Pattern will also be busted with a burst higher in the wake of another disappointing jobs report.

    And all it took was for the “Bad News is Good News” algo to pin futures to their ramp job highs until 9:31. The BN=GN algo, of course, has nothing to do with additional stimulus.

    We already know $1.9 trillion is on the way to some who desperately need it and countless more who don’t. It also has nothing to do with additional QE. That’s an ongoing $120 billion per month, rain or shine.

    No, it is about the usual tricks employed by central banks and their proxies: shorting VIX… …shorting bond futures……ramping WTI futures……and shorting the yen. They have all been employed over the past week just to make sure that any lingering bearish patterns were undeniably busted. Just another day in the “markets.”

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  • Update on Currencies: Feb 4, 2021

    A subtle shift is occurring in the currency markets. As expected, DXY has broken out after finally reversing at our 89.50-89.92 target. This comes as USDJPY is sneaking up on our 200-DMA target and EURUSD has almost reached our 100-DMA target. Once all these pieces slide into place, what then?

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