pebblewriter

Month: June 2022

  • That Sinking Feeling

    As anyone on a budget could tell you, the headline of this post is hardly news. Income isn’t keeping up with expenses, and isn’t likely to any time soon.

    The Fed might prefer PCE over CPI because it ignores food and gas prices. But, it’s those very categories which are making it difficult for the average family to make ends meet.

    Futures were already off by 1.25% before the data hit the wires. Our analog, still on track, suggests the decline is going to accelerate in the coming weeks.

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  • Q1 GDP Slumps Further

    Stocks are essentially flat following a slight downward revision in Q1 GDP from -1.5% to -1.6% and export numbers which are truly circling the drain.

    The disappointing data came on the heels of the worst consumer confidence reading since Feb 2021 and three (so far) Fed presidents advocating a 75 bps rate hike in July.

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  • Charts I’m Watching: Jun 28, 2022

    Futures are up modestly, backtesting the 20-day moving average for a second day. Time to buckle up.

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  • Horse Trading

    The ECB’s annual forum is officially underway in Sintra, Portugal, with the market pondering the likely winners and losers. Christine Lagarde and Jay Powell are no doubt doing a little horse trading as both urgently need to address spiraling inflation and neither in a position to afford higher rates.

    The US can help mitigate inflation by ramping the USD higher. Europe, which faces a more complicated energy dilemma thanks to the war in Ukraine, is stuck between a rock and a hard place.  As the euro slides, the sharp spike in energy prices accelerates.

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  • But It Looks Like a Rally…

    Following a series of intraday ramps, futures shot up above the 10-day moving average as soon as the market closed. Bogus? Of course. But, the record will reflect (and the algos have responded to) a seemingly bullish move. Chase it at your own peril.

    Today’s tricks will include trying to get past the 10am New Home Sales and Michigan Consumer Sentiment data.

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  • Charts I’m Watching: Jun 23, 2022

    Futures just backtested the 10-day moving average and our analog trendline, leaving the door open for a pullback – as long as VIX doesn’t get clobbered again.

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  • Oil: Back in the Groove

    WTI spent May 2020 through Feb 2022 in a fairly well-defined channel (below, in white) as it recovered from its pandemic lows. It broke out on Mar 1, however, topping 100 and taking only 5 sessions to reach our 130 target which wasn’t schedule to happen until December.Since then, it’s seen a series of fits and starts, holding an internal trend line and flirting with reentering the white channel. It’s flirting no more. Against the backdrop of a gas tax holiday and significant demand destruction, it has dropped through the channel top and the 100-day moving average.

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  • Update on Bitcoin: Jun 21, 2022

    My apologies for today’s post being so late. Our webhosting company just now fixed the “network connectivity problem in one of [their] clusters.”  I’d be very upset about it except for the fact that this is the very first time in over two years that they’ve ever let me down. This post will be a retrospective instead of a look ahead at today’s session.

    Bitcoin reached our next downside target over the weekend: the dual Fibonacci targets of 17,611/17,692. Like everything else over the holiday weekend, it bounced pretty strongly. And, just like everything else, it won’t last. As we detailed in our last BTC update [see: Bitcoin’s Meltdown] there is substantially more downside ahead.

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  • Charts I’m Watching: Jun 17, 2022

    Futures bounced over 1% overnight into OPEX, but are now flirting with negative readings.

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  • Don’t Forget the Dow

    I don’t usually pay much attention to the DJIA. It’s a nonsense index that’s manipulated six ways to Sunday and has little following in the investment community. Having said that, the financial press reports on it all the time and the average Joe, seeing this, seems to care.

    As a result, we often see weird things happen in the markets when the Dow reaches significant inflection points. The last great example of this was in the depths of the pandemic crash in 2020. President Trump, who frequently cited the Dow as a measure of his success, was understandably concerned as markets tanked.

    Tweets such as this took on an ever more anxious tone as the plunging Dow approached the level it was when he took office in 2016, with tweets alternating between cheerleading the markets and goading the Fed and Congress into taking action.

    When the Dow finally reached the levels at which it traded on election night 2016, the crash was miraculously over. From our March 20, 2020 post Time to Buy:

    As we all know, the market closed the following session at 18,591, a mere two points above its close on Nov 9, 2016. Some coincidence, huh?

    Why does any of this matter right now?  The Dow is closing in on another of those interesting inflection points: its 2020, pre-pandemic highs at 29,568.

    If the folks behind the curtain have decided that we can’t handle dipping below the “everything is alright” marker, then we could get a nice bounce here.

    If, on the other hand, this time really is different, that support will be breached and investors might just start panicking a little more, down to around 28,800 or lower by mid-July.

    Stay tuned.