It’s been a little over two weeks since our analog was unveiled [see: Analog Watch.] So far, so good. Friday’s high came within 6 points of the next upside target – just a few days ahead of schedule.
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Month: May 2022
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Analog Update: May 31, 2022
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Inflation Update: PCE
PCE comes out later this morning, providing the most up-to-date picture of the challenge facing the Fed. Judging from yesterday’s 2% pop, investors are hopeful that inflation might be leveling off.
Futures are off very slightly.
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A Crucible Moment
The Information reports that Sequoia Capital has issued a warning to its startup founders, detailing a series of moves that should be taken to avoid a “death spiral.”
“Its latest warning to its portfolio companies takes the form of a 52-slide presentation, a copy of which was viewed by The Information. Sequoia described the current combination of turbulent financial markets, inflation and geopolitical conflict as a “crucible moment” of uncertainty and change. Sequoia told founders not to expect a speedy economic bounceback akin to what followed the start of the pandemic because, it warned, the monetary and fiscal policy tools that propelled that recovery “have been exhausted.””
Sitting here in Silicon Valley today, where one bedroom shacks still fetch $1.5 million despite sliding tech stock prices, it’s not hard to imagine that the worst is yet to come.
Futures are up modestly this morning, with our analog still on track.
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Another Miss
Today’s miss came in April Durable Goods orders: 0.4% vs 0.8% consensus (0.3% vs 0.6% for ex-transportation.)
But the real miss on everyone’s minds is the parents of those 19 children who were struck down in Uvalde, TX yesterday. Those parents will have no one to get out of bed this morning. No one to cook breakfast for or bustle off to school. No one to kiss goodbye.I’m struck as I watch the moment of silence at the NYSE…why silence? What the companies represented in this great American institution should really do is announce that they’ll withhold all political contributions to any candidate for national, state or local office who doesn’t vote for gun reform.
I grew up in Texas where many families I knew had hunting rifles – typically a .30-06 for deer hunting, a .22 for target practice or varmints, or a 12 or 20-gauge for dove hunting. I never heard of anyone wanting or using an assault rifle or a high capacity magazine for hunting – or for defensive purposes, for that matter. It’s just plain stupid.
In a country with more guns than people, our gun problem is a needless tragedy.
And, it’s coming soon to a town near you. In fact, good luck finding one that hasn’t had a violent gun death so far just this year. By the end of 2022, this map will have more than twice as many red dots, each one representing one or more lives, often children, taken by gun violence.
It’s inescapable. Except for the fact that we have an election coming up – a chance for every American to break their silence and fire the politicians, bought and paid for by the gun lobby, who drone on and on about the sanctity of life but do nothing to prevent these senseless deaths. They are complicit. It’s time for them to go.continued for members… (more…)
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Economic Data Deluge Begins
It’s a big week for economic data, with earnings and outlook announcements already setting a bearish tone. First up this morning is April new home sales, which came in at 591k units – a 16.6% drop from March and a 32.9% plunge from April 2021. It barely beat the 2020 pandemic lows.
As everyone now knows, this is a direct result of the sharp rise in mortgage rates which is a direct result of the sharp rise in inflation resulting from the Fed’s policy mistake: driving rates much too low for much too long as discussed last July [see: Time to Sell Your Home?]
Over the past month, it has seemed that the old “bad news is good news” meme which played such an important role during ZIRP had been sidelined. Based on recent Fedspeak, however, it’s probably better characterized as being in cold storage. The Fed’s determination to reduce inflation will be sorely tested in the days ahead.
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Charts I’m Watching: May 23, 2022
Futures are up sharply following Friday’s 140-point reversal which finally saw SPX/ES reach the -20% mark. As we discussed last week, the market should surprise many this week.
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Sure OPEX, But Then What?
Futures are up about 1% this morning – par for the course for an options expiration Friday. The Chinese prime rate cut is no doubt helping.
But, what happens next week as new and pending home sales, durable goods, FOMC minutes, GDP, PCE and Michigan Sentiment come rolling in? This will be a serious test of the market’s ability to hold its lows, let alone continue to bounce.
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Follow the Leader
One of the many wild cards in trading is the tension between the cash markets and the futures. SPX, for instance, already came within 4 points of our downside target at 3854.90 – which was 20% off the Jan 4 highs. But 20% off for ES means 3846.60 – 8 1/2 points below the lows it registered last week.
The upshot is that while SPX came reasonably close to a bounce spot, ES was a little further away. This raises the prospect of an after-hours “do over” where ES gets the chance to tag some solid support.
If the tag comes during trading hours with SPX dropping through its support, things could get even uglier than we saw yesterday.
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Charts I’m Watching: May 18, 2022
We’re seeing more backtesting this morning, consolidation after yesterday’s strong surge.
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