Futures are currently off 12 points, paring a 24-pt deficit after VIX sent a shot across the bow at 5:30.
continued for members…
It remains to be seen whether the algos can hold back the disappointment over the trade deal outcome and a CPI number which, while slightly below estimates, won’t prompt an immediate dovish response from the Fed.
Although CL remains above its SMA200 and has broken out of its falling white channel, its red channel has technically broken down for the time being. This suggests the algos are not yet done provoking more downside for equities — but, the argument isn’t terribly strong.
Likewise, RB has broken above its purple TL and remains in a rising channel — both bullish, but note how the action is clustered in the lower half of the rising white channel and has yet to break back above the yellow midline — a sign that the downside might not be complete.
USDJPY is holding its channel line at the moment, but I still see it breaking down in the next few days.
Rates seem to still be on track for a sizable decline by mid-June.
With this being a Friday, I wouldn’t be at all surprised to see the algos spring into action and try to produce some green shoots. It’s a good day to be cautious.
With this being a Friday, I wouldn’t be at all surprised to see the algos spring into action and try to produce some green shoots. It’s a good day to be cautious.My expectation is that equities are headed to at least the SMA200 at 2775.90 – also the gray channel midline. I believe this is supported by the bond market. If my forecast for the 10Y is correct (has been so far) then we’ll see the 10Y at 2.172 by mid-June – ideally June 17. It’s represented by the purple dot on the chart below.
This would put it well below the current 2Y yield of 2.225% — meaning we’d have an inversion unless the 2Y moves lower to stay below it. 
If the 2Y does decline that much, its red TL will have clearly broken down — which is bearish. The chart below from 2015-2017 shows how stocks reacted negatively every time the 2Y broke down below support or failed to rise above resistance and reacted positively every time the 2Y broke out.
When the 2Y broke our in late 2016, it led stocks higher. This is a pattern that has been going on for the past few years…
…and much longer.
If the 2Y does decline that much, its red TL will have clearly broken down — which is bearish. The chart below from 2015-2017 shows how stocks reacted negatively every time the 2Y broke down below support or failed to rise above resistance and reacted positively every time the 2Y broke out.
When the 2Y broke our in late 2016, it led stocks higher. This is a pattern that has been going on for the past few years…
…and much longer.
On a side note, we can see BA and AAPL still struggling and COMP seemingly zeroed in on at least a backtest.
UPDATE: 11:50 AM
UPDATE: 11:50 AMES is coming up on a line of potential support – the gray .618 at 2816.17. And, it’s already bumping up against the bottom of the well-defined falling white channel. It could remain within the falling white channel if it bounced here and finished the drop to 2816 on Sunday.
But, it bears watching since we need a bit of a bounce if the drop to the SMA200 (currently ES 2777) is going to be dragged out till next Thursday.
Note that AAPL came within .22 of our SMA200 target.
UPDATE: 13:28 PM
Quadruple overhead resistance here — a logical place for this bounce to run out of steam if it’s going to today.
VIX also just backtested its SMA200.
VIX also just backtested its SMA200.UPDATE: 3:29 PM
ES blew through the resistance and is now testing the channel top — all on short covering and rumor-driven algo action. I’d fade ES right here.
Note that VIX is testing the white midline again.
I just noticed the Jul 30 VIX calls are selling for .45. Evidently no one believes there’s any downside ahead…
Note that VIX is testing the white midline again.
I just noticed the Jul 30 VIX calls are selling for .45. Evidently no one believes there’s any downside ahead…
Comments
2 responses to “Beautiful Letters Aren’t Enough”
Do you have a post which you recommend with the “big picture”. I’ve read a few hints that you were working on it over the past month, not sure if you were planning a special report which will be pinned to the home page or if it should be pulled up from one of the daily posts. As usual the daily posts have good updates and targets. Been interesting to watch again
Hi Michael, I have been back and forth with the big picture forecast, am still doing some data gathering and interpretation. The volatility of the past week has made a dent in my research schedule. I hope to have something out by next Tuesday.