pebblewriter

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  • Stocks: Back to Reality

    S&P futures are off a little over 4% since our Correction Warning post on Aug 28. As it turned out, we were slightly early. ES didn’t top out until three sessions later in spite of the multiple warning signs we detailed at the time. Most significantly, ES/SPX both broke down below their Feb 20 highs on Friday. While SPX bounced back above its, ES has plunged back below its in the pre-market.

    This potential backtest represents a critical level of support and will determine the course of the market and, likely, the outcome of the presidential election.

    The bigger disruption, of course, has been in the Nasdaq. COMP plunged 9.9% from its Sep 2 highs to Friday’s lows and is set to decline further this morning.

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  • Having Fun Yet?

    Stocks nailed our second downside target from last Friday [see: Correction Warning.] Judging from the financial press, it was a shock to the average investor.  It’s sad that a 4.5% correction would warrant such concern. But, as I often say, that’s the world in which we’re living.

    Bulls need February’s highs to hold, while bears are rooting for the algos to follow the direction offered by currencies and bonds.

    Many Robin Hood traders and newbie option “investors” are no doubt wondering why they didn’t pick up a good book instead of plunging into the market. These are indeed difficult times.

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  • Dire Straits

    After a couple of days of VIX rising while stocks spiked higher, it only makes sense that VIX is falling while stocks are tumbling. This is the bizzaro world in which we’re living.

    Unless it bounces sharply on our channel bottom target today, add CL to the list of algo drivers which have experienced a bearish (for stocks) 10/20 cross. It has been in a bullish alignment since May 11.

    Recall that RB crossed on Tuesday and USDJPY crossed on Aug 27. Despite the administration’s insistence that everything is peachy, the evidence is building that the market will finally take notice of the economy’s dire straits.

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  • DXY: “I Got Better”

    RBOB has joined VIX and USDJPY in a bearish 10/20 cross, adding slightly to the likelihood of a downturn. Yet, DXY’s breakdown reversed itself overnight on reversals in both EURUSD and USDJPY, meaning that there are still plenty of tricks up this market’s sleeves. Speaking of tricks, President Trump rolled out an EO forestalling evictions which, though it will likely prove difficult if not impossible to enforce, is very popular with the algos. There is arguably no limit to the EOs, Fed and Treasury actions and Congressional bills which are all calculated to improve election odds. So, how is the dollar still standing?

    It reminds me of my favorite Monty Python and the Holy Grail moment – John Cleese’s miraculous recovery from being turned into a newt.

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  • DXY Breaks Trend

    VIX’s 10/20 cross held yesterday, meaning we almost got a lower low on the day. The overnight ramp job was good for 32 points before DXY started attracting attention. It has dropped below the falling trend line it was patiently following, meaning our forecasts in the currency space are accelerating – especially EURUSD and silver.

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  • Mumbo Jumbo and Chicanery

    Futures are up modestly this morning on the Dow reconfiguration chicanery and stock split mumbo jumbo. The Dow reconfiguration is, like all that have come before it, designed to do one thing: deliberately boost the current and future value of the Dow by adding winners and ditching losers.That’s why the Dow is a meaningless measure of market performance and is, at best, a signal to the wary of the games being played to portray economic health. Perfect example: the Dow’s sharp reversal on March 23 after it had fallen to its 2016 election lows.

    The stock split mumbo jumbo should be ignored altogether. Exchanging a $5 bill for 5 singles produces no net increase in value, but don’t tell the Robin Hood traders. They’re convinced that value of AAPL and TSLA has been enhanced via the maneuver.

    The thing people should be watching today is VIX which, though its 10/20 cross failed last Friday, is back for another bite of the poisoned apple.

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  • Correction Warning

    One of my favorite simple indicators of momentum shifts is the 10/20 cross. If the 10-day moving average moves above the 20-day, it indicates a bullish shift in momentum.  If it moves below, it indicates a bearish shift.

    The last time VIX experience a bullish cross was on Jun 12, whereupon ES completed a 300-pt plunge. The subsequent bearish cross on July 2 ushered in a 400-pt meltup for stocks. Today, VIX will experience a bullish cross again. With most of our indicators agreeing, we should finally get that backtest we’ve been expecting. continued for members… (more…)

  • Just Another Thursday…

    Another Thursday, another million filing for unemployment.

    Hopefully news of Jeff Bezos’ net worth topping $200 billion will take some of the sting out of being unemployed.

    As usual, the futures couldn’t care less, preferring to focus instead on whether or not the Fed will keep refilling the punch bowl following its virtual Jackson Hole shindig.It’s not as though jobs don’t matter, but…VIX.All indications are that the Fed will revise its inflation policy to “average inflation targeting,” meaning that it will allow inflation to run above its 2% target following periods where it has run below 2%.  This is somewhat analogous to my new policy of dating supermodels only after going more than a month without.

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  • Update on AUDUSD: Aug 26, 2020

    After a long, dry spell, I’ve had several requests this week for charts for AUDUSD.  Given the USD’s weakness of late, this seems like a good time to dust off some very old charts.

    In April 2017, we noted that the pair was at important support – its SMA200. If it held, it was in a position to break out of a falling channel. If not…

    …should it drop through the SMA200 at .7546, I would not want to be long at all.  There’s plenty of downside potential, starting with .6584 – the .886 Fib retracement of the rise from .6006 in Oct 2008 to 1.1079 in July 2011.  Should .6584 fail, the October 2008 lows are all that stand in the way of a test of .5493 – the .886 Fib retracement of the rise from .4775 in Apr 2001 to 1.1079.

    Then, I pretty much forgot about AUDUSD…until this week.  Funny how things turned out.  The pair spent over a year bouncing back and forth across the SMA200 until finally breaking down for the last time in April 2018.

    From there, it was all downhill until Mar 19, 2020 where it came within .0015 (0.3%) of the .5493 target.

    Should we care that it has bounced back to potential overhead resistance?

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  • Update on COMP: Aug 26, 2020

    It’s been only two weeks since our last update on COMP in which we pointed out COMP might be running out of upside. In that time, the index popped up to an even more compelling reversal point.

    Due to its age, the rising white channel that dates back to 2009 is subject to a little wiggle room. What’s not subject to error, though, is the 2.618 Fibonacci extension at 11643.40.

    Today, COMP reached the intersection of that Fib and the white channel top – a strong sell signal for an index that seems to have forgotten how to decline.The thing is…it’s not the only sell signal our charts are giving us.

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