pebblewriter

Author: pebblewriter

  • Be Careful What You Wish For

    Who’s in charge of ‘splaining things to the prez?  Trump says he wants a cheaper dollar so the US can be more competitive in global trade.  Yet, because the US is a net importer, a cheaper dollar will simply increase the cost of imported goods (just like tariffs.)

    The net effect will be higher inflation which will in turn make it that much less likely for the Fed to lower interest rates — a frequent topic of Trump’s tantrums.

    Sometimes interest rates and the DXY play nicely; sometimes they don’t.  Rates have already settled quite a bit lower even as the dollar edges slightly higher.

    Perhaps Larry “King Dollar” Kudlow should also explain to Trump that a breakdown in the dollar (the dashed red trendlines) is sometimes detrimental to inflated stock prices — a frequent topic of Trump’s boasts — while a breakout (the purple TL) can be very positive.And, while it’s possible Powell can be intimidated, who among us would be surprised if the Fed ignored the next opportunity to cut rates — no matter how justified — in order to send the message that they won’t be bullied?

    Futures are edging lower as the SMA10 edges higher, setting up the another test of the first line of defense.Speaking of tests, we should find out today how much support DB can expect from the ECB et al.

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  • Deutsche Bank: Kann Dieses Schwein Pfeifen?

    There’s a lovely English figure of speech which suggests the ridiculousness of something happening: “when pigs fly.”  In German, the same sentiment can be expressed by the expression “ich glaub mein Schwein pfeift” which means “I believe my pig whistles.”  DB is surely trying, but it’s having a hell of a time whistling a happy tune.

    We last visited the stock on March 13 [see: When Push Comes to Shove] when it was threatening to break out of a small consolidating triangle after breaking down below our previous short signal at 11.  From the Mar 13 post:

    A breakdown from a falling channel is incredibly bearish, but a move back above the bottom of the falling channel (around 9.50) would be net positive. To get there, it will need to break above the red TL and will then face its SMA200, now at 10.32.

    A long position with very tight stops would make sense for those willing to roll the dice. However, if it can’t retake the channel bottom, then it remains a dead bank walking and a good short.Obviously, shorting it in the hopes that the ECB lets it fail would entail some risk. No doubt the ECB is trying to figure out a way to restructure it in such a way that it’ll survive and, ideally, not take the rest of the world down with it. Until then, I think it’ll remain on life support.

    As it turned out, the triangle broke down and not up.  The stock spent 6 weeks being propped up around $8/share before finally breaking down again and shedding 28% in a nifty little falling channel.

     * * *
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    over the years.  While the stock has lost 32% since our initial forecast in Sep 2016, our
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     * * *

    It finally bottomed at 6.49 in June and bounced back up above 8 where it collided with overhead resistance and is currently backing off in the wake of the latest restructuring news.

    Make no mistake about it, DB is in a world of hurt.  Given that it’s the 15th largest bank in the world with over $40 trillion in derivatives, its demise could devastate the financial system.  Can this pig whistle?  If so, is it just whistling past the graveyard?

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  • Turn About: Fair Play?

    Since the market rallied 170 points on May’s dreadful 75K jobs report, should we expect it to give up those gains on June’s stellar 224K jobs report?As we approach the open, we can see that sort of logic working its way through the futures.  It might not be quite as easy for the Fed to justify any rate cut in July, let alone a 50 bps cut.

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  • Algos to VIX: Thank You for Your Service

    When USDJPY, WTI and TNX all plunge, stock prices almost always follow suit.  When they don’t, it’s usually because VIX is signaling the algos that there’s nothing to worry about.

    It’s no surprise, then, that the three equity breakouts (the purple, gray and white channels) we’ve seen over the past month have all been precipitated by breakdowns in VIX.

    It’s particularly common on weekends and during low-volume holiday weeks and is frequently contrary to the economic news of the day.

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  • Charts I’m Watching: Jul 2, 2019

    The breakout fell flat, yesterday.  ES might have closed 26 points off the ramp highs had VIX not performed its usual theatrics.  Futures are essentially flat this morning as we await Fedspeak from Williams (centrist) and Mester (hawk.)  Despite nearly unanimous expectations for a rate cut in July, most of the recent such comments have tilted hawkish.Will today’s comments support the prevailing view? I’m not so sure.  And, I’m not so sure it matters that much.  The 10Y continues to cling tenuously to 2%.continued for members… (more…)

  • Here We Go Again

    The August 2018 new all-time highs lasted five weeks and, when they failed, yielded a 600-pt plunge.  The May 2019 new all-time highs lasted about 6 hours and yielded a 225-pt plunge when they failed.  The June 2019 new, all-time highs lasted 3 days and yielded a 51-pt decline before staging a recovery that will (coincidentally, I’m sure) see new highs posted on this morning’s open.

    Perhaps the trade war really will be resolved this time. And, maybe OPEC really will ink a new trade output deal. Heck, the Fed might even cut rates even though markets are at all-time highs.

    All I know is that while chasing new highs on the back of VIX “breakdowns” and oil “rallies” has worked out fine for buy-and-hold types (who have no fear of the music stopping), it has been a losing proposition for traders.

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  • Currencies Update: Jun 28, 2019

    Aside from the wild swings in USDJPY, 2019 has been fairly quiet for the currency pairs we follow.  We’ll look at the moves to date, the reasons behind them, and what to expect going forward.Stocks’ performance today will likely depend on whether BA can remain above its 200-day moving average.  Fundamentals, dontcha know…

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  • Oh So Close!

    After a non-event GDP revision, S&P 500 futures are currently up slightly and backtesting the 10-DMA that broke down yesterday.

    All eyes remain on the G-20 summit.  Will Trump & Co. get the trade talks back on track, or at least tweet that they have?

    Meanwhile, I’ll be watching to see whether BA “un-suspends” its share repurchase plan now that the latest debacle has hit the press. Algos will be watching, too. Markets are oh so close to getting through the quarter with the nice gain intact.  Can they hold on for two more sessions?

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  • Algos: Much Ado About Mnuchin

    How sensitive are algos to quips from the White House on trade?  This is what sent futures soaring early this morning:

    That tweet has been deleted.  This is what Mnuchin actually said:

    S&P futures gave up 13 points on the correction, but are still up 9 points — loitering just above the SMA10 they tagged yesterday — mostly on an interim bounce in USDJPY.

    Bears can take heart that VIX held a small TL of support. Though, this also sets up a potential buy signal in case equities have the temerity to decline a second day in a row.continued for members… (more…)

  • Shame on the Bund

    It’s been almost three weeks, but we might finally see a backtest of the SMA10 if ES isn’t able to hold its neckline at 2940.Why now, when the Q2 close is right around the corner?  Blame it on the German 10Y.

    As we approached the end of Q1, the US 10Y bounced for almost two months — propping up the USD and thus stocks. But, back then, Bunds were around -4bps.

    This time around, Bunds are at -33 bps.  The US 10Y bounced for a grand total of 3 days before slipping back below 2%.

    Our yield curve model has been eerily accurate for well over a year. I don’t expect that to change any time soon.

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