pebblewriter

Month: May 2022

  • A Failure to Communicate

    Remember that scene in Cool Hand Luke where Paul Newman mouths off to the Captain after a failed escape attempt? He doesn’t initially appreciate the gravity of his situation. He is soon reminded.

    That’s what yesterday’s post-Fed presser felt like. Powell was trying to convey the sense that the Fed means business. It is going to get serious about escaping the inflationary mess it has stepped in.

    The market (well, the algos) didn’t hear that. They heard Powell say exactly what they expected and, spurred on by the huge bets lined up on the bearish side of the ledger, decided to mouth off.

    Clearly, they don’t appreciate the gravity of the situation, as we were reminded by this morning’s labor productivity report – the worst in 75 years.

    We would do well to remember that we’ve had these moments of euphoria before. The carefully curated decline which began in late March…

    …has seen more than a few deviations of late.

    But, facts are still facts. Inflation – especially very sticky labor costs – is still a problem, and the Fed waited so long that they now have no choice but to tighten into a recession. There was a time when they could have engineered a soft landing. But, that opportunity was, dare we say, transitory.

    continued for members… (more…)

  • FOMC Day: May 4, 2022

    Today’s FOMC meeting is one of the most anticipated and consequential in years. It’s difficult to overstate its importance in terms of economic impact and, perhaps more importantly, Fed credibility.

    Yes, we care about whether the Fed hikes 50 or 75 basis points – though either is unlikely to put a dent in inflation. The bigger question is what the Fed does with its $9 trillion balance sheet.

    Futures are up modestly.

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  • A Day Off

    I am currently neck deep in algo research and, given that all of our equity, currency, and commodity targets remain unchanged, I will forgo rehashing them today. If anything changes dramatically today, I’ll post later this evening. Otherwise, look for an update tomorrow morning.

    GLTA

  • A Fork in the Road

    Yankee great Yogi Berra famously advised that “when you come to a fork in the road, take it.” The S&P 500 is weighing such a decision this morning, having closed Friday at a critical level of technical support.  A rebound from here would buy the Fed a little more time for inflation and hawkishness to ebb. A failure to bounce implies at least another 8-10% downside.

    Which will it be? Fortunately for us, our chart patterns are sending a very unambiguous signal.

    continued for members… (more…)