While the FOMC is not expected to rock the market’s boat today, a spectacular 11% rise in NVDA and another wrinkle in the Middle East conflict are certain to induce volatility.
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Month: July 2024
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FOMC Day: Jul 31, 2024
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Charts I’m Watching: Jul 30, 2024
Futures are up slightly as the FOMC begins its July meeting. But, it’s a continuation of the consolidation that began last week.
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Charts I’m Watching: Jul 29, 2024
Futures are moderately higher after rising as much as 35 points overnight.
Wednesday’s FOMC rate decision will dominate the financial news this week.continued for members… (more…)
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PCE in Line
PCE came in as expected, 0.1% MoM for headline and 0.2% for core. Personal income and spending, however, showed a slowdown. Income was 0.2% versus 0.4% expected and prior, and personal spending was 0.3% versus 0.4% expected and prior.
The mixed picture took a little steam off the futures, which had been up as much as 50 points overnight. Still, ES managed to hold important support as we approach the open.
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Worst Day Since 2022
It was a horrid day for the market, but a very good day for chartists.
We got a taste yesterday of the power of our yield curve model, with SPX dropping by the largest percentage since October 2022 to nail our next downside target.
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Yield Curve Cautions
As we’ve discussed every day for the past week, the 2s10s is sounding an alarm that should have equities very concerned.
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Update on RUT: Jul 23, 2024
A lot has happened for RUT in the past week. It was only 11 days ago that we updated its chart, suggesting RUT would reach 2282 by the end of the year.
RUT’s reversal at its .618 in April set up either a Gartley or Bat pattern, meaning a move to its .786 at 2282.27 or its .886 at 2364.78. If we extend the dashed red trend line to the right, we get an intersection with the .786 at the end of the year – a very common scenario. While the .786 in December is a logical next target, an equally compelling case can be made for the .886 in September or October.
Don’t look now, but RUT pushed past the red TL we discussed, allowing RUT to tag 2282 (well, 2278) late last week.
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Charts I’m Watching: Jul 22, 2024
Futures are up sharply as traders digest the seismic changes to the race for the White House.
By any measure, the next Democratic candidate will likely have better odds to win the presidency than did Joe Biden. Kamala Harris is being touted as the likely nominee, and she is considered more pro-business than Biden.continued for members… (more…)
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Fed Independence?
In an interview with Bloomberg Businessweek, Donald Trump made an interesting comment regarding his plans concerning the Fed. Back in February, Trump told Fox that he wouldn’t reappoint Jay Powell.
Now he says he’ll let Powell finish out his term. But, he adds a very telling codicil:
“I would let him serve it out,” Trump says, “especially if I thought he was doing the right thing.”
So what would Trump do if he didn’t think Powell was doing the right thing? Powell is already being pilloried for the rate cut which pretty much everyone agrees should occur in September.
“I think he’s political, I think he’s going to do something to probably help the Democrats, I think, if he lowers interest rates.”
Trump was certainly vocal during his own presidency. In September 2019, in just one example of many, Trump tweeted that the Federal Reserve and Jerome Powell have “no guts, no sense, no vision!” after the Fed lowered interest rates by a quarter point when CPI was 1.7% and rising.
Without delving into politics, it’s important to recognize that if elected Trump will hammer the Fed to lower interest rates and devalue the US dollar. It’s an approach which might earn him some votes, but it carries significant risks for the economy — particularly if he were to follow through on his promise to lower corporate taxes to 15% and revive his 2017 Tax Cuts and Jobs Act with its $4.6 trillion price tag.
We don’t like paying taxes any more than the next guy, but with a $35 trillion national debt, can we really afford a substantial increase to the deficit? And, devaluing the dollar while lowering interest rates and increasing tariffs is almost certain to increase inflation in the US, a net importer.
We don’t talk politics here at pebblewriter. We talk markets. And, the impact of some of these developments could be very significant.
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Futures are up slightly this morning after tagging our ES 5573 target a second time.
The bounce and subsequent recovery…
…was made possible by VIX’s violent 36% plunge in mere seconds. 
We refer to such a plunge as a “shot across the bow” for its ability to remind the algos of the market’s ability to be “guided” higher by exogenous drivers: VIX, currencies, interest rates, etc.continued for members...
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Charts I’m Watching: Jul 18, 2024
Futures are up moderately following yesterday’s meltdown and NASDAQ’s worst day since Dec 2022.
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