pebblewriter

Posts

  • Update on Bonds: Dec 7, 2021

    Now that everyone has jumped on the inflation bandwagon (better late than never) the bond market has thrown them a curve. Rates have plunged in the face of Fed promises to throttle back inflation by raising rates, leaving many economists scratching their heads.

    This is nothing new. Fundamentals have increasingly been an unreliable source of information for fixed income traders/investors in recent years. Chart patterns, on the other hand, have trumped the economists all along.

    As 2Y10Y approaches our downside target, this seemed like a good time to check in on the bond “market.”

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  • Charts I’m Watching: Dec 6, 2021

    VIX tagged our 34.84 target on Friday – an important breakout in risk – before tumbling back into the safe zone.

    With other factors holding their ground and equities’ 100-DMAs still untagged, it’s not at all clear that the worst is over.

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  • Update on Bitcoin: Dec 5, 2021

    BTC reached our next downside target at 46,000 as detailed in our Nov 26 update [see: Update on Bitcoin – Nov 26, 2021.]

    Though the dashed black line offers potential support, the more significant downside target is the SMA200 currently at 45,997. We’ll call it 46,000 since BTC seems to like round numbers lately. It represents another 15% below current levels for a total drop from Nov 10 of 33.3%.

    It actually plunged well below 46,000, reaching 41,967 before snapping back above the 200-DMA by the close. For better or worse, BTC continues to play by the rules of chart and Fibonacci patterns – our rules, at least. We have to wonder whether this will finally dampen the bullishness of those who have been calling for 500,000 and even 1,000,000.

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  • A Death Cross from VIX

    It’s only happened 4 times in the past five years. The last time it happened was on Feb 27, 2020.  SPX had reached a new all-time high of 3393.52 a week earlier and had sold off 12% so far on news of the new coronavirus reaching US shores.  We were in the minority of analysts warning of an imminent selloff.VIX, which had been loitering in the teens for months, had gapped from 17 to 25 a few days before, sending its 50-DMA above its 200-DMA. In technical analysis, this is known as a golden cross. It’s normally a bullish move. But, since a rising VIX is typically bearish for stocks, this was the equivalent of a death cross.

    We all remember what happened next.Note that only half of the prior instances resulted in a large correction. The other half turned out to be insignificant. VIX was hammered into submission within a day or two, unwinding the 50/200 cross and sending stocks scurrying higher.

    Which will it be this time? Was this morning’s dreadful jobs report the keymaster and gatekeeper’s meet cute? The “stag” to the economy’s “flation?”

    Unlike Nigerian Air Force Lance Corporal Ogah Bercy, we have at least been warned.We should know soon enough.

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  • 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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