Futures are off sharply this morning as investors grapple with the escalating fallout from Russia’s invasion of Ukraine. ES was off as much as 130 points from Friday’s highs before the algos kicked in.
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Month: February 2022
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Charts I’m Watching: Feb 28, 2022
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Time to Crash the Oil Market
They’ve done it before. And, it’s the only action that could truly punish Russia while helping to solve the inflation problem.
The charts fully support it, with loads of logical downside targets just begging to be tagged.
Yes, stocks would suffer too. But, you can’t have everything. And, if it gets underway quickly enough, there’s still plenty of support for equities at the -20% mark or higher.
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Then and Now
Technical analysis and chart patterns don’t always pan out. But, when they do, the results can be pretty amazing.
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COMP chart from Nov 23, 2021…
This morning…
DJIA chart from Jan 4, 2022…
This morning…
S&P 500 futures chart from Jan 6, 2021…
This morning…
The Nikkei futures chart from November 3, 2021…
This morning…
The EURUSD chart from May 28, 2021…
This morning…
The dollar index from June 7, 2021…
This morning…
The Bitcoin chart from Dec 9, 2021…
This morning…
There were misses, too. It was unclear back in mid-2021 whether the correction would be allowed to commence with an ugly December 2018-style downturn or the Fed would keep the party going through year-end – knowing full well that those without large stock portfolios would bear the brunt of runaway inflation.
I also didn’t believe that central banks would let oil and gas prices soar to current levels. I assumed that they, like I, could anticipate how disastrous a decision that would be and what a bind it would leave them in.
Now Russia is invading Ukraine and the Fed’s policy options are extremely limited – none of them attractive let alone effective. In other words, things will get worse before they get better.
And, that’s okay. As we pointed out in early January [see: One Way or Another] there are lots of ways to force interest rates lower. But, given the magnitude of the Fed’s policy mistake, only one is likely to work at this point.
That leaves us with the interesting prospect of a market correction that’s scary enough to bring rates down off the ledge, but not so scary that real damage is done. The current taper schedule means QE will end in March. So, there’s plenty of time to to put such a plan into place before the Fed would be expected to start raising rates significantly.
Here we are.
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War…What is it Good For?
Absolutely nothing? Well…vol came under pressure again last night despite the recent 10/20 cross and obvious escalation in risk of military action in Ukraine. Apparently the threat of war is good for stocks.
Nevertheless, the futures heard and obeyed and continue to eye the VIX breakdown threat which works more often than not.
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The Ukraine Crisis Worsens
Russian troops entered Eastern Ukraine following its formal recognition of the two separatist regions, marking an escalation in the seriousness of the Ukraine crisis. Futures fell over 94 points from Friday’s close before the algos kicked in and are now down less than 10 as we approach the open.
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Charts I’m Watching: Feb 18, 2022
After big losses yesterday, ES gained over 20 points overnight. It has since given up those gains and has completed a small H&S pattern targeting 4247.
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The Line in the Sand
Futures continue to lurk around the 200-DMA as we approach Friday’s OPEX, with plenty of bullish and bearish headlines stacking up on either side of this important line in the sand. When it finally lets loose, the move should be pretty dramatic.
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Charts I’m Watching: Feb 16, 2022
Futures are off about 0.50% as the algos process a big beat (inflation aided) on retail sales and a miss on mortgage applications.
Having retaken the 200-DMA, can ES hold it until OPEX on Friday?continued for members… (more…)
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PPI Nearly 10%
PPI topped CPI again, coming in at 9.7% YoY (9.1% expected) and a whopping 1% MoM (0.5% expected.)
Futures suddenly aren’t so sure about the overnight ramp to top the 200-DMA.
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Bullard Speaks
In a CNBC interview this morning, Fed President Jim Bullard said “Our credibility is on the line here…” Anyone paying any attention to the Fed knows that that ship sailed a long time ago.
Futures have been all over the map, down as many as 55 points before VIX was hammered following a false news report regarding the situation in Ukraine.
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