pebblewriter

Category: Charts I’m Watching

  • The House That Jay Built

    You know things are getting real when ES closes below its 50-day moving average.  It has bounced at that support 9 times in the past year. When the 50-DMA fails, the 100-DMA has provided support 6 times since Jun 2020.

    With ES closing below its 50-DMA yesterday and likely to reach its 100-DMA today, is it finally time for a test of the 200-DMA?

    The stakes are high, as VIX pulled back after reaching important resistance at our 32.50 target yesterday.

    Meanwhile…inflation, the Fed policy choice that pundits are mistakenly calling a “mistake.” Sure, it delivered a body blow to the have-nots, but It provided record high stock and real estate prices to the rest of us.

    November CPI is due out next Friday, and we are still looking for it to mark a turning point in this cycle. WTI is off 23% from its highs – technically a bear market.  And agricultural commodities have backed off their breakout and are eyeing a potential breakdown.

    Our assumption remains that CPI will be back below 3% by the time the taper is complete. Sorry savers, but there probably won’t be any need to raise rates any time soon, if ever.

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  • Charts I’m Watching: Dec 1, 2021

    The algos have been busy overnight again, driving futures up 50+ points as we head into the open. Omicron shutdowns, botched responses and Powell’s admission that the Fed might accelerate the taper seem to have been forgotten.

    ES came close to our next downside target, but whiffed. Is the correction over?

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  • Update on NG: Nov 30, 2021

    Natural gas is one of those commodities that’s rarely discussed except in connection with the weather or inflation. Like oil and gas, it could play an important role in determining what action the Fed takes over the coming months.

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  • Update on NDX: Nov 30, 2021

    NDX has been on correction watch for over three months, ever since its 200-DMA caught up with the bottom of its never-ending rising white channel.

    Does its recent 4.6% slump offer any hints as to what’s next?

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  • Update on NKD: Nov 30, 2021

    The Nikkei 225 is less a securities index than it is a measure of how much intervention the Bank of Japan feels like throwing its way. It’s what the Dow aspires to be when it grows up.

    So, it’s only at times like this that I bother to post it anymore.

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  • Update on RUT: Nov 30, 2021

    RUT’s chart reminds me of the old country and western song: “How Can I Miss You When You Won’t Go Away?”

    The Russell 2000 is down over 10% today, so it’s technically in a correction.  Some of its individual components have really taken it on the chin. And, it’s fallen below its 200-DMA, which is typically bearish.  Seems like a sure fire shorting opportunity, right?

    Not so fast. RUT has fallen over 10% three previous times over the past 21 months, recovering each time to or near its former highs. The most recent peak represented new all-time highs.

    How long can this go on? And, what does an Italian mathematician have to do with it?

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  • This is Not Going to Be Good

    Futures are off sharply on comments by Moderna CEO Stéphane Bancel on the effectiveness of existing vaccines against the omicron variant:

    “I think it’s going to be a material drop. I just don’t know how much because we need to wait for the data. But all the scientists I’ve talked to . . . are like, ‘This is not going to be good’.”

    Bancel’s comments might also apply to this morning’s testimony from Jay Powell and Janet Yellen who head to Capitol Hill to explain why 6.5 inflation is nothing to be concerned about.

    BTW, WTI made it official overnight, tagging our 66.81 target.

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  • Update on Oil & Gas: Nov 29, 2021

    Almost a year ago we noted that the rapidly rising price of oil and gas would contribute to alarming CPI prints [see: Don’t Ignore Inflation.]

    Punch line? Oil and gas will have to fall significantly by April or we’re looking at a 20%+ YoY increase in gas prices – which has historically produced 2.4-2.7% annual inflation and a 2%+ 10Y.

    At the time, it was clear that the base effect would ultimately generate YoY deltas in gasoline that would exceed 40% and, if the correlation held, generate CPI over 3.5%. We were being too conservative. November’s delta should be around 62% and October CPI reached 6.22%.

    Then…

    …and now.

    When inflation spilled over into stickier categories such as food, shelter and wages, CPI accelerated more than the rise in oil/gas prices alone would justify. As the chart above illustrates, CPI’s rate of change outpaced that of gasoline alone.

    Investors finally began to notice. Maybe inflation wasn’t transitory after all.  Rising interest rates suddenly became a concern rather than a bullish confirmation of the reflation trade.

    In our last update on oil and gas [see: Nov 19 Update] we reiterated the fact that oil and gas deltas would need to be held in check if inflation and interest rates were to stabilize.

    Regardless of where this correction peters out, November should mark a turning point in CPI, with December and future months declining back towards an “acceptable” level. The trick is to keep interest rates from breaking out, which means the Fed must put the brakes on inflation right here and now.

    Friday’s plunge was a good start. CL came within 0.8% of our downside target, shedding nearly 14% on the day and over 21% from its October highs.

    It’s too early to say whether the omicron variant will feature the sort of transmission and mortality rates that could send the global economy into another tailspin. But, one thing is clear: non-OPEC+ countries are breathing a sigh of relief at the correction in energy prices – even if it means more downside for equities.

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  • Update on Bitcoin: Nov 26, 2021

    BTC reached our next downside target, the SMA100 and cloud bottom added just last week [see: Nov 19 Update.]

    BTC reached our next downside target, a 17.2% drop from our short call on Nov 8, reiterated on Nov 9 and 10. The cloud bottom and SMA100, currently at 53,160, is the next target/support.

    Bitcoin, off 22% since recent highs, is now officially in a bear market.  As we discussed last week, there is substantial downside if this support doesn’t hold.

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  • A Selloff of Interest

    ES sold through our next downside target in reaction to the new B.1.1.529 COVID-19 variant.

    A number of factors have also hit downside targets, making this plunge on a normally quiet day a selloff of interest. Our targets in equities, currencies and commodities remain unchanged.

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