pebblewriter

Year: 2022

  • 2019 Redux?

    In late 2019, many were mystified by a market that continued to rise even in the face of worsening fundamentals. VIX – the supposed fear gauge – inexplicably plumbed new lows and, eventually, broke down below a channel (in red below) dating back to late 2017….

    …even as news of a deadly pandemic became more and more concerning.  For chartists, the breakdown in VIX was frustrating but telling. Algos and all the portfolios which key off them were keying off VIX. And, the breakdown was all the algos cared about – to a point.

    Eventually, the breakdown was no more. VIX soared and the market plunged. But, for over 3 months (including, of course, the usual YE run to the barn), the market made new highs based almost solely on the vanquishing of fear.

    It’s hard not to think of 2019 when observing the current market. With the Fed’s own forecasts and the bond market screaming “recession,” stocks are ignoring rising interest rates and inexplicably bouncing. Inexplicable, that is, except for VIX.

    I have no secret insider source on the Fed’s trading desk. But, if you were trying to raise interest rates without trashing the stock market, wouldn’t you be shorting VIX every time the market dipped? It’s safe to say that the latest ongoing assault on VIX is the tail that’s wagging the market’s dog…just like in 2019.

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  • Good News is Bad News

    We’ve been used to the bad news is good news meme for such a long time, it feels weird to even type that. That’s the reality, however, when investors are already counting the days till the Fed’s easing cycle and we get 528,000 new jobs instead of the 258,000 expected.

    The tightening might just have to last a little longer than the bulls have suggested.  Though, the efforts being made to lower oil prices are bound to start paying dividends in the longer run. CL reached our next downside target. Could this slide turn into something real? Could ES do something so drastic as drop below its 10-day moving average? Can VIX survive the usual 9:30 smackdown?

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  • Charts I’m Watching: Aug 4, 2022

    Markets are flat following yesterday’s 1.5% move higher engineered by a stunning 12% VIX smackdown off Wednesday’s highs.

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  • Charts I’m Watching: Aug 3, 2022

    The VIX nonsense continues, ramping futures back above the SMA100 with the help of Jim Bullard, Fed president and occasional CNBC host, who insists there is no recession – just like he insisted inflation wouldn’t be a problem.

    Whether there is or not, the market will never reflect one as long as this kind of nonsense goes on.

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  • Two More Backtests to Watch

    Futures are off modestly this morning as the 10Y approaches our next downside target: a backtest of both its decades old falling price channel and the rising channel from its 2020 lows.

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  • Charts I’m Watching: Aug 1, 2022

    Futures are off moderately following an algo-driven meltup in July that shook the bears and reset sentiment.

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  • 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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