pebblewriter

Month: April 2022

  • The Market is (Still) Broken

    Futures came roaring back into the falling white channel yesterday, revealing what many know but few say out loud: the market is broken. When expectations of a 1% quarterly rise in GDP yield, instead, a 1.4% decline, stocks should decline. Plain and simple.

    The old “bad news is good news” argument doesn’t work any more because the Fed no longer has the ability (at least this coming meeting) to ease in response to a slowing economy. Perhaps they would have if they hadn’t squandered the opportunity to taper months ago, but that’s water under the bridge.

    Instead, we get this massive disconnect which is, at the end of the day, a means of ramping stocks in advance of the bad news we all know is coming via the Fed’s meeting next week: a 50+ bps rate hike. Beyond monetary policy, which is now a headwind instead of a tailwind, we see more and more indications of tough times ahead. As Bill Blain (a treasure) sums it up:

    The world is not what we think it should be. It is what it is…and that is getting less pretty.

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  • Update on Currencies: Apr 28, 2022

    The dollar index continues its tear, surpassing both its 2017 and 2020 highs this morning. This is consistent with our forecast [see: Apr 11 Update on Currencies] that the Fed would need help from a rising dollar to attack inflation without having to resort to sky-high interest rates that would further accelerate the growth of the country’s national debt.At 103.928, DXY hasn’t seen these levels since 2002 in the midst of the 54% dot com crash. While beneficial to the inflation outlook, the dollar’s strength hasn’t been very healthy for alternatives such as silver, which just reached our next downside target.continued for members… (more…)

  • Stocks’ Broken Record

    Yesterday marked the fourth time in the past two months that SPX tested the same important Fib level.  The failure to maintain a trend is becoming…well, a trend. Will SPX keep playing the same old song or is it finally time for this trend to be broken?

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  • Update on RUT: Apr 26, 2022

    In our last update [see: Nov 30, 2021 Update on RUT] we noted that RUT had fallen by over 10% and dropped below its 200-day moving average – both bearish developments.

    Yet, it had bounced repeatedly at a key Fibonacci level, the 1.618 extension at 2177.88. By repeatedly, I mean seven separate times where it dropped below 2177.88, then recovered back above it.  To complicate things, it had closed that day just above another important Fibonacci support level at 2202.11. In the end, we left members with the simple advice:

    If it drops through 2177, then I’d get short with tight stops muy pronto with a new target of 1918.77 (a 22% drop.) Otherwise, watch out for head fakes.

    It should come as no surprise that RUT did eventually break down and reach 1918.77, but only after criss-crossing 2177 eighteen more times and rallying 9% into the end of the year. How’s that for headfakery?RUT has now tested its new best friend 1918.77 over and over and over again. Its latest tag occurred earlier today. It closed at 1890.47, within 0.5% of its two previous cycle lows.

    Now what?

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  • Charts I’m Watching: Apr 26, 2022

    ES closed back in its falling white channel following its midday recovery, keeping our target price and date unchanged.

    Note: The current forecast page has been updated with targets for SPX, ES, COMP, VIX, USDJPY, EURUSD, DXY, GC, SI, BTC, CL, RB and the 10Y.

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  • Update on COMP: Apr 25, 2022

    Almost five months ago, we noted that COMP was nearing an important turning point: our 16,158 target. From Close Enough on Nov 19:

    COMP is probably no more than a day or two away from a very significant top.

    We identified two downside targets: 12,813 and 10,122.  COMP topped out at 16,212 the very next session and reached 12,813 on Feb 24.  And, again on Mar 14. And, again today. What the heck is going on? After three separate attempts, is 10,122 still on the table?

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  • Back on Track

    ES assiduously followed a well-defined falling channel ever since the top in March – with the exception of last week’s breakout. As we pointed out, that breakout was a head fake. ES not only reentered the channel in Friday’s meltdown, but came very close to breaking down below it in the after-hours.

    If it can remain in the channel, our next downside target is looking very good.  If not, we’ll get there a lot faster than expected.

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  • Not a Coincidence

    Stocks were rejected at the 200-day moving average following an aggressively hawkish comment by Fed Chair Powell that a 50 bps rate increase was “on the table” at the Fed’s May 3-4 meeting. The Fed watches charts too, folks, so this was hardly a coincidence.

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  • More of the Same

    Futures are keying off the exact same factors as yesterday. USDJPY is creeping higher and VIX is threatening a breakdown.

    Traders continue to face an array of headfakes and misdirection as ES backtests its 200-DMA yet again.

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  • Charts I’m Watching: Apr 20, 2022

    Forget the fundamentals. Between USDJPY’s breakout and VIX’s smackdown (19% over the past two sessions), the bears are getting pummeled by algos.

    As a result, ES’ falling white channel has been busted – meaning at least a delay in any additional downside.

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