pebblewriter

Author: pebblewriter

  • Jawboning an OPEX Rally

    Yesterday’s 1.2% spurt higher was driven not only by the usual push in USDJPY and plunge in VIX, but a healthy dose of hopium regarding the debt ceiling crisis. Congressional and White House reps were nearly unanimous in declaring that a deal is as good as done.

    Whether they’re speaking the truth or simply trying to avoid a market meltdown a la 2011 remains to be seen. Both SPX and ES saw a bullish 10/20 cross, but it could unwind if ES closes back below the former resistance at 4166. Keep on eye on the ever proficuous VIX, which usually triggers algos to buy any significant dips by breaking below support such as the purple channel bottom below.

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  • Debt Ceiling Worries

    We’re starting to see cracks in the equities and bond markets related to the debt ceiling. Interest rates are ratcheting higher. And, although OPEX-related maneuvers are working to prop up stocks, we had a momentary breakdown in SPX yesterday.

    Utilities, a bond proxy for some, have taken a big hit this week as investors shift into shorter-term, less volatile treasuries.

    Which would you rather own, XLU with a beta of .56 and yield of 3.01% or a 6-mo Tsy paying 5.25%?

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  • Retail Sales Miss

    April retail sales came in at 0.4% versus expectations of 0.8%, underscoring the notion that the economy isn’t nearly as strong as the market would have you believe. Futures, already off slightly, have added to their losses.

    It remains to be seen, however, whether the propping up of equities in advance of OPEX and the debt ceiling debacle can be derailed.

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  • Charts I’m Watching: May 15, 2023

    Futures are up modestly, but fading as the open approaches. In short, it’s just like every other open for the past week.

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  • End of the Line?

    The market has frustrated both bulls and bears lately, vacillating between sharp downturns and even sharper recoveries. But, a close examination of the charts shows two very obvious patterns that suggest the tide is about to turn – not in a good way.

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  • Bank Concerns Are Back

    After a brief respite, bank stocks are again under pressure with deposit flight and CDS both pointing to escalating concerns.

    Neither the April CPI nor PPI prints support the notion that the Fed will lower rates any time soon – keeping the pressure on banks and an economy that depends on easy access to cheap credit.

    Futures backed off the key 4166 threshold again yesterday, only to bounce back and test it again overnight.

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  • CPI on Target

    April CPI came in pretty much on target: 4.9% versus 5.0 in March and 0.4% for both headline and core MoM.  Futures are up sharply thanks to the usual VIX collapse.

    But, will it be enough to break the trend of reversing at 4166?

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  • Can We Trust It?

    Futures are down modestly, backtesting the SMA10 they soared above last week. Interestingly, though, the moving averages remain bearishly aligned.

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  • Charts I’m Watching: May 8, 2023

    Futures are slightly higher in the lead up to Wednesday’s CPI print.

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  • NFP Complicates Fed’s Plans

    The 253K increase in nonfarm payrolls handily topped the 180K consensus. Likewise, unemployment dipped to 3.4% versus expectations of 3.6% and average hourly earnings printed a 0.5% increase versus expectations of 0.3%.

    To be clear, this is not the kind of slowdown that would encourage a Fed pause or pivot. Yet, VIX has been hammered by 8.5% overnight, so futures are up over 30 points.

    At what point will the market begin to believe the Fed’s “higher for longer” forecasts?

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