March retail sales came in at -1.0% versus -0.4% expected and -0.2% previous. Core slipped 0.3%. Early reaction is that the drop wasn’t enough to forestall another rate hike in May. So far, the futures have taken the news in stride.
But, it remains to be seen whether the algos will view the setup as positively. VIX’s previous bounces off the TL from Jan 2018 have been tough on stocks.
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After closing below its 10-day SMA for the first time in a month, ES is backtesting it…
…on the back of PPI data that essentially echoed yesterday’s CPI print. Headline PPI crashed to 2.7% YoY and -0.5% MoM. Though stripping out food and energy, core PPI fell only 0.1% MoM and increased 3.4% YoY.
As we discussed yesterday, 80% of the MoM decline was due to the sharp drop in gasoline prices.
Also out this morning, credit portfolio managers agree with the Fed’s assessment that the economy is headed for recession. It’s a troubling backdrop as we enter earnings season in the midst of a credit crunch.
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For the first time in over two years, core CPI topped headline. Core, which ignores food and gas prices, climbed 0.4% MoM and 5.6% YoY, while headline came in at 0.1% MoM and 5.0% YoY.
Not surprisingly, futures jumped at the news that headline CPI had dropped. But, our charts still show an important risk just ahead.
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Futures are flat this morning as algos continue to follow the VIX suppression playbook.
With CPI and Fed minutes coming out tomorrow, PPI and initial claims on Thursday, and retail sales and Michigan sentiment on Friday, the remainder of the week is unlikely to be as quiescent.
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We’re finally getting the SMA10 backtest this morning.
Better late than never.
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The March jobs report came in at 236,000 versus 230,000 expected. Headline unemployment dipped slightly to 3.5%.
Futures bounced slightly on the back of algos which were focused on the nightly VIX meltdown.
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Job cuts rose to 228K (vs 200K expected) last week. It will officially register as a drop, however, as the previous week was revised from 198K to 246K. When viewed through the prism of new highs in bankruptcies and an earnings implosion… 
…it’s not too surprising that futures are drifting lower.
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March ADP payrolls came in at +145K versus +210K estimates, strengthening the stagflation/recession argument. 
Futures have drifted lower following yesterday’s sharp decline, suggesting at least a channel bottom/10-day SMA backtest. Keep an eye out for ISM services coming out at 10ET.
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After reaching our next upside target, futures have settled into a pause.
No surprise, as the algo factors are doing the same.
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It was touch and go on Friday as XLE pushed above its 200-day moving average and WTI smacked into its 50-day. Fortunately for oil bulls and inflation enthusiasts, OPEC+ was watching the same charts and took action.
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