pebblewriter

Month: July 2022

  • Push Comes to Shove

    Thanks to the ongoing assault on VIX, the bear rally from mid-June is on the brink of becoming an actual breakout. Bolstered by some key earnings beats and surprisingly dovish commentary from Powell, fundamental buyers can’t be faulted for being bullish.

    Or…it could just be a masterful headfake designed to wash out the massive downside bets which had legitimately accumulated earlier in the year – in which case, a sharp downdraft is just ahead after this morning’s data dump.

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  • Charts I’m Watching: Jul 28, 2022

    Another Fed meeting, another VIX-driven algo meltup.

    But, something’s more than a little sketchy about this one – aside from the fact that the recession which Powell refused to acknowledge yesterday just got closer to being official.

    It might be shallow, but the 0.9% drop in Q2 (first estimate, vs +0.5% consensus) makes for two quarters in a row – the commonly accepted definition of a recession.

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  • FOMC Day: Jul 27, 2022

    Futures have ramped almost 1% overnight – a common occurrence lately, especially in advance of a Fed decision.

    Even the durable goods orders beat (a miss if you’re looking for the Fed to slow their rate hikes) did nothing to thwart the algo-driven meltup.

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  • Holding the Line

    Can VIX be contained for another few days? If you want to know what’s going to happen in the market this week, that’s the critical question.

    As weak earnings reports and economic data have dribbled out over the past week, VIX has tested its 200-day moving average almost every day. Every time it comes close, it gets smacked back down. So far, those tasked with preventing another leg down in stocks have been able to hold the line.

    It’s how ES, directed by algos, climbed back above its 50-day moving average and managed to remain there. So far, at least.

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  • Fast and Furious

    Between an FOMC meeting, consumer confidence, GDP, durable goods, PCE, consumer sentiment, new home sales and a slew of important earnings calls, this week promises to be one of the most important so far in 2022.

    Somewhere in all that data we should learn whether the economy is really in a recession (spoiler alert: it is.) The market’s response could be both fast and furious.

    Futures are up modestly but fading as we approach the open.continued for members… (more…)

  • Charts I’m Watching: Jul 22, 2022

    It’s another one of those mornings where ES is taking its cues from a timely VIX smackdown, erasing a modest overnight loss and promising to add to yesterday’s rally.

    But, today is actually different, with the 10Y gapping lower as stocks creep higher.

    It could be a delayed reaction to yesterday’s sharp selloff in oil and gas. On the other hand, it could be a sign of turbulence ahead.

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  • Fixing Gas Prices

    Gasoline futures (RBOB) have reached our 200-day moving average target set on March 3 [see: The Devil You Know] after having broken out of a falling flag pattern.  Then…

    …nothing would be as effective at punishing Russia and helping to solve the inflation problem as crashing the oil market…If oil does retreat, stocks should too. Reversing at the .786 would be a good start……as would RB reversing at its 1.618.

    …and now.By falling 33% since then, RB has given the economy several gifts, chief among them the opportunity to bring inflation down – if retail follows suit.  EIA reported 4.272 per gallon for the month of March. July is shaping up as 4.41 – a tiny drop compared to futures prices.

    The YoY increase in retail prices would remain elevated at 45%, down from June’s 60.7% but in line with average increases during Mar-May, when CPI averaged 8.46%.

    Even if RB were to decline further, it face falling comps from August 2021. Retail prices remained steady from July to August. So, the onus is now on retailers to make a difference. And, something tells me they’re rather enjoying their windfall profits.

    The top five oil companies – Shell, ExxonMobil, BP, Chevron and ConocoPhillips – saw their Q1 profits triple from 2021 to 2022. ExxonMobil, for instance, netted $2.7 billion in Q1 2021 and $8.8 billion in Q1 2022. It is expected to report over $10 billion in Q2. Taking into account futures prices, it is obvious that the Russian invasion of Ukraine has provided cover for what’s really just good old American greed.

    Meanwhile, equities markets are trying to make sense of the ECB’s 50 bps rate hike (all the way up to zero!)Hate to tell you, Ms. Lagarde, but 0% in an 8.6% inflationary environment with a 2% inflation target is still wildly stimulative – not to mention delusional.

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  • A Better Fit

    Yesterday’s mind-bending rally made very little sense except for the fact that it both washed out many more weak bears and resulted in a more logical placement of ES’ downside target. I’ll explain.

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  • Waiting in the Wings

    This morning feels a whole lot like yesterday morning, with futures ramping higher on the latest smackdown in VIX. Of course, these maneuvers can be an effort to force a breakout in stocks. But, they can also be an effort to put a little more air under stocks in advance of a downturn.  With plenty of important earnings still to be announced, the Gazprom threat, and a potential ECB rate hike just ahead, there’s plenty or risk waiting in the wings.

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  • Stay Tuned

    There are points in the life of every analog that so strongly test one’s convictions that the temptation to bail is overwhelming. This is one of those days.

    Every analog eventually dies – rarely with a bang, more often with a series of overnight/weekend ramp jobs like the ones we’ve just seen.

    If the analog holds, today’s head fake was the last, best chance to get on board. If it doesn’t, today was the obvious sign that the analog was a terrible idea in the first place.Stay tuned.

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