pebblewriter

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  • Danger Ahead

    Today is a very important day in the markets. The signals that prompted us to short on several days ago are still intact, and more have joined their ranks – the most notable being the breakdown in the 10Y flag pattern.

    ES snuck down and tagged our SMA200 target overnight. To put things simply: If it doesn’t hold, all hell will break loose.There are any number of fundamental reasons for the market to tank, including the spikes in coronavirus cases in many states. Some governors, such as Texas’ Abbott, are even copping to how disastrous the situation has become.Working to prevent a meltdown, of course, are the algo strategies which have been so effective since Mar 23. It should be an interesting next few days.

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  • Another Day, Another Test

    As we slowly make our way toward the end of Q2, we continue to see tests of important support. They are usually followed by sharp bounces despite the growing evidence that a selloff is right around the corner.Will today be the day the market finally takes the plunge?

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  • Oh Yeah, the China Trade Deal…

    When does “it’s over” mean it’s not over?  When the market plunges 65 points, of course.

    The 2% hiccup came when Fox’s Martha MacCallum asked Trump advisor Peter Navarro whether John Bolton’s claims that Trump delayed imposing sanctions on China over its policy of interning Uighur Muslims would jeopardize the China trade deal. Navarro, fresh off accusing China of deliberately seeding the virus in the US by sending “over hundreds of thousands of Chinese citizens here to spread [it] around…” didn’t equivocate.

    “Do you think that the president — he obviously really wanted to hang on to this trade deal as much as possible and he wanted them [China] to make good on the promises because there had been progress made on that trade deal,” MacCallum told Navarro. “But given everything that’s happened … is that over?”

    “It’s over,” Navarro responded.

    ES quickly plunged below its SMA10 and 2.618 Fib, but was promptly rescued by a plunge in VIX and spikes in CL and USDJPY which, not so coincidentally, popped back above its SMA10.

    In all the turmoil over 9.2 million sickened and 475,000 killed by COVID-19, the ongoing social unrest, and an economy which is arguably teetering, it’s sometimes easy to forget the China trade deal and the months during which the market took its cues from the daily press briefings and chopper talk quips about how magnificently negotiations were going.

    With the White House amping up its rhetoric over China’s culpability for the pandemic, I imagine Navarro’s initial assessment was the honest one.

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  • Charts I’m Watching: Jun 22, 2020

    Futures are off slightly this morning as ES has backtested the channel it meant to break out of on OPEX Friday.  Today marks the beginning of the last seven sessions until the end of Q2 – traditionally a period of flat or rising prices.

    Can the seasonal trend offset the growing list of bearish fundamental and technical factors?

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  • Quad Witching Friday

    It would be unusual in normal times for stocks to drop on OPEX or a Quad Witching Friday. Given the massive stimulus inflating the markets, these are far from normal times.

    ES broke out of the falling channel it’s been in since June 10, primarily on the VIX breakdown and oil breakout we’ve been expecting. The big question, given that we have a quarter end coming up, is how far equities will go.

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  • The Holding Pattern

    Futures are heading for another test of the 2.618 Fib extension at 3076.93, the fourth since last pushing above it on Monday.

    There are numerous targets below, but that would mean cooperation from the algos – a rare commodity these days. The bearish case, however, is growing stronger every day.

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  • Powell: A Translation

    My two favorite Powell quotes from yesterday’s senate testimony:  “I don’t see us wanting to run through the bond market like an elephant snuffling out price signals and things like that” and “We want to be there if things turn bad in the economy or if things go in a negative direction.”

    Without question, the Fed has snuffed out price signals in service of keeping “things” from going in a negative direction. Translation: we have and will continue to manipulate bond yields (and currencies, volatility and oil prices) whenever necessary to prevent (1) yields that would otherwise spike higher from bankrupting the country; and, (2) stocks from falling.

    Look for more of the same doublespeak today.

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  • With a Little Help From its Friends

    Oh, I get by with a little help from my friends
    Mm, I get high with a little help from my friends
    Mm, gonna try with a little help from my friends

    Faced with another do or die moment, equities survived another brush with a breakdown – with a little help from the Fed, of course.Now, 234 SPX points later, it has cleared most of the overhead hurdles and is back on track to behave the way we would usually expect given that Friday is OPEX and the end of Q2 is not far off.

    Just for the record, the spike had little to do with retail sales – which served only to boost ES back above its 10-day moving average and the yellow TL connecting the 2018 highs.

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  • Another Do or Die Moment for Equities

    S&P 500 futures tagged our next lower target overnight, the .618 Fib retracement at 2930.12. Notably, they tagged the SMA100 but just missed the SMA50 down at 2906.56. Most importantly, they missed the channel midline which I have felt was critical in determining whether or not we’ll see a bounce into the end of Q2.

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  • Is It Safe?

    It happened 9 sessions before our charts indicated, but ES and SPX both tested their SMA200s yesterday. As expected, we’re getting a nice bounce – primarily on the back of a 15% drop in VIX from yesterday’s highs (and the breakdown to come of the dashed, red trend line.)ES looks likely to backtest its 2.618 extension at 3076.93. The complication, for bears, is that this will put SPX well above its lower 2.618 extension. In other words, it will gap back above overhead resistance as soon as the opening bell rings. What else is new?

    It’s tough to see on the chart above, but VIX’s SMA10 was just about to cross above its SMA20 – a bullish sign for VIX and bearish one for stocks. If VIX is hammered today, the bullish cross can be avoided.If stocks’ meltup is to resume, we could still see VIX backtest its broken white channel or the yellow trend line off the 2018 lows which is nearing the SMA200 currently at 24.89.

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