It has been a long time coming, with expectations of a rate cut ranging from “certainly” to “not a chance in hell.”
Futures are taking their cues more from GOOGL and MSFT than the FOMC at the moment.
Will we finally get a real backtest? Our potential downside targets are getting very lonely.
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Futures are off moderately as investors place their bets on tomorrow’s FOMC rate decision. 
This follows yesterday’s pop in prices which was reported as motivated by a better than expected treasury report, but was in reality driven by [drumroll please] more algo funny business in VIX.
In any case, SPX was finally pried off its 2.24 Fib extension just in time for tomorrow’s FOMC decision.
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Futures are flat as we enter a data-laden week accented by Wednesday’s FOMC interest rate decision.
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PCE increased 0.2% MoM and 2.6% YoY in December, in line with most estimates. Core PCE increased 2.9% YoY. This is the smallest gain since Mar 2021. Drilling down, goods rose 1.1% (durable goods 1.5%) in December while services rose 0.3%.
Real PCE rose 3.2% YoY, with the goods category growing 5% and durable goods rising 8.5%.
At 0.7% MoM, personal spending rose substantially more than the 0.4% estimates (and prior.) Spending rose 4.2% YoY, a slight decrease from November’s 4.4%.
December pending home sales far outpaced estimates at +8.3% versus 2.0% and -0.3% prior. The annual increase was much less frothy at 1.3%. The monthly beat was paced by 11.9% and 14.0% gains in the South and West respectively. Sales dropped 3.0% in the Northeast.
continued for members…If you knew absolutely nothing about the company Intel, but knew just the basics of chart patterns and Fibonacci patterns, today’s sharp pullback would have come as no surprise. In fact, you could say the same thing about the past 25 years.
Note that 69.29 was only 75 cents away from an 88.6% retracement (a bat pattern) and occurred at the top of an eleven year-old channel. Easy pickings.
The subsequent drop would normally be to a lower Fib level which, in this case, was the 50% retracement. It also lined up with the bottom of the white channel. Also, easy pickings.
The rebound back to the 88.6% retracement was only slightly tricky. It was in essence a double top, which are usually hard to anticipate. In any case, once the double top occurred, the subsequent drop was almost exactly to the 78.6% Fib retracement (not shown.)
The rebound from there to its recent highs, however, was almost exactly a 61.8% retracement (44 cents off, again easy pickings.)
Volumes have been written about how/why chart patterns and Fibonacci patterns work. It makes for interesting reading. But, for those who don’t care how the watch works and just want to know what time it is, it’s good info to have.
Speaking of which, if INTC doesn’t recover to at least the bottom of the little purple channel below (45.50ish), things could get much worse.
Stay tuned…
Q4 advanced GDP came in at 3.3% annualized versus 2.0% estimates and full year 2023’s 2.5%. The PCE price index and durable goods orders came in as expected, though durable goods ex-transportation came in sharply higher than estimates. The numbers…
Futures had already bounced at the rising white channel midline, but extended their gains after the data dump. The more important chart to watch, however, remains SPX itself.
New home sales are due out at 10 ET.
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In last month’s update on gold and silver [see: Dec 5 Update] we noted that gold and silver had reached our mid-October targets. We forecast that silver would likely drop to its 200-day moving average and continue dropping to backtest two significant trend lines at 22.
It reached 22.04 on Monday before and has bounced 2.5% this morning.
Likewise, gold reversed sharply off our 2152 target from October and dropped 160, but hasn’t quite reached our next lower target. It is an interesting development, and one which makes a statement about the USD and, possibly, inflation.
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Another day, another meltup drifting lower into the open.
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Futures rose to fresh highs overnight on algo action. Currencies, commodities and VIX all remain in position to aid this rally – as long as the bevy of earnings due out this week complies.
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Keep an eye on home sales, due out at 10am ET. Shelter has been one of the more problematic categories of inflation for the Fed, showing a 6.2% annual increase in December. Without a doubt, it remains the biggest impediment to getting inflation back down to 2%.
Like yesterday, the overnight ramp has faded as we approach the open. The housing data could determine whether we see a more robust backtest or new highs.
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