Futures are moderately higher ahead of the open and important economic data later this week.
Wednesday’s PCE print is the only official inflation data we’ll see prior to the next FOMC decision on Dec 10.
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Futures reached our next downside target yesterday, though two weeks later than our forecast [see: Not So Fast…] Admittedly, we heard from many naysayers back in October when we posted this chart.
And, this morning…
Days like yesterday, where a 120 point overnight rally turned into a 160 point selloff, are enough to scare anybody. But, especially NY Fed President Williams who took time out of his busy schedule to remind algos that there room for “further adjustments” to interest rates.
It reminds us of James Bullard’s similar announcement in the midst of a 2014 selloff. He asserted that QE should continue because interest rates were too high (the 10Y was at 2%.) It’s a great reminder of the Fed’s important third mandate: to prevent crashes.
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Futures are up sharply following NVDA’s better-than-expected earnings alleviated concerns about the prospects for AI-related companies.
The overnight meltup was good for 80 or so points on ES. Another 20 points were added on when September’s jobs data was released, showing that unemployment had ticked up from 4.3% to 4.4%, the highest since Oct 2021. Average hourly earnings rose from 3.7% to 3.8% and hours worked remained stable.
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Futures have rebounded slightly following another negative session, but are nervously eyeing NVDA’s quarterly results due out after the close.
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There’s a famous old quote that advises: “If you find yourself in a hole, stop digging.” This seems applicable in so many instances today: Trump and the Epstein files, AI investment, FOMC policy, crypto investment, the overall economy…
It’s perhaps the principle which best explains what’s happening to the financial markets. There’s a correlation in chart patterns known as the Head & Shoulders Pattern. Once you’ve dropped below and backtested the neckline, there’s more downside than people expect.
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Futures are off modestly following Friday’s backtest of the initial head & shoulder neckline.
Note that SPX’s SMA200 has finally reached its former highs. As we discussed quite some time ago, this allows a significant backtest with the benefit of the support the SMA200 would offer. It’s a prime opportunity for TPTB to let a little air out of an overinflated market.
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The market failed the first test, the smaller Head & Shoulder Pattern at 6800 that pointed to 6535. Now, it’s getting a shot at the larger one that points much lower.
The key will be whether it can hold 6700ish.
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There’s a famous quote from Terminator 2: There is no fate but what we make. It seems particularly apt at this stage of the economic/political cycle.
The government reopened, but the news is chock full of important developments including Trump’s countless unforced errors which drive his increasingly fraught future. We’ve known since well before liberation day that the inflation bill would eventually come due. You could say the same about the deportations which are producing labor shortages and driving up costs. How much longer can the K-shaped recovery continue to diverge before we see a reversion to the mean?
Futures are staging a repeat of yesterday, with the overnight ramp job fizzling as we approach the open.
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Futures are up moderately ahead of the House vote to reopen the government.
I seriously doubt it will go smoothly.
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