When USDJPY, WTI and TNX all plunge, stock prices almost always follow suit.  When they don’t, it’s usually because VIX is signaling the algos that there’s nothing to worry about.

It’s no surprise, then, that the three equity breakouts (the purple, gray and white channels) we’ve seen over the past month have all been precipitated by breakdowns in VIX.

It’s particularly common on weekends and during low-volume holiday weeks and is frequently contrary to the economic news of the day.

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The breakout fell flat, yesterday.  ES might have closed 26 points off the ramp highs had VIX not performed its usual theatrics.  Futures are essentially flat this morning as we await Fedspeak from Williams (centrist) and Mester (hawk.)  Despite nearly unanimous expectations for a rate cut in July, most of the recent such comments have tilted hawkish.Will today’s comments support the prevailing view? I’m not so sure.  And, I’m not so sure it matters that much.  The 10Y continues to cling tenuously to 2%.continued for members… (more…)

The August 2018 new all-time highs lasted five weeks and, when they failed, yielded a 600-pt plunge.  The May 2019 new all-time highs lasted about 6 hours and yielded a 225-pt plunge when they failed.  The June 2019 new, all-time highs lasted 3 days and yielded a 51-pt decline before staging a recovery that will (coincidentally, I’m sure) see new highs posted on this morning’s open.

Perhaps the trade war really will be resolved this time. And, maybe OPEC really will ink a new trade output deal. Heck, the Fed might even cut rates even though markets are at all-time highs.

All I know is that while chasing new highs on the back of VIX “breakdowns” and oil “rallies” has worked out fine for buy-and-hold types (who have no fear of the music stopping), it has been a losing proposition for traders.

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Aside from the wild swings in USDJPY, 2019 has been fairly quiet for the currency pairs we follow.  We’ll look at the moves to date, the reasons behind them, and what to expect going forward.Stocks’ performance today will likely depend on whether BA can remain above its 200-day moving average.  Fundamentals, dontcha know…

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After a non-event GDP revision, S&P 500 futures are currently up slightly and backtesting the 10-DMA that broke down yesterday.

All eyes remain on the G-20 summit.  Will Trump & Co. get the trade talks back on track, or at least tweet that they have?

Meanwhile, I’ll be watching to see whether BA “un-suspends” its share repurchase plan now that the latest debacle has hit the press. Algos will be watching, too. Markets are oh so close to getting through the quarter with the nice gain intact.  Can they hold on for two more sessions?

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How sensitive are algos to quips from the White House on trade?  This is what sent futures soaring early this morning:

That tweet has been deleted.  This is what Mnuchin actually said:

S&P futures gave up 13 points on the correction, but are still up 9 points — loitering just above the SMA10 they tagged yesterday — mostly on an interim bounce in USDJPY.

Bears can take heart that VIX held a small TL of support. Though, this also sets up a potential buy signal in case equities have the temerity to decline a second day in a row.continued for members… (more…)

It’s been almost three weeks, but we might finally see a backtest of the SMA10 if ES isn’t able to hold its neckline at 2940.Why now, when the Q2 close is right around the corner?  Blame it on the German 10Y.

As we approached the end of Q1, the US 10Y bounced for almost two months — propping up the USD and thus stocks. But, back then, Bunds were around -4bps.

This time around, Bunds are at -33 bps.  The US 10Y bounced for a grand total of 3 days before slipping back below 2%.

Our yield curve model has been eerily accurate for well over a year. I don’t expect that to change any time soon.

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Last week, we kept a close eye on the EURUSD, wondering whether it could push past its SMA200 after taking such a long time to even reach it.  This morning, that question is settled.  EURUSD broke out……which means that DXY has finally broken down.This says a lot about the bond market — which continues to sound alarms about the stock market.

But, so far, the end of quarter goal-seeking is ruling the roost — meaning we could easily get another bounce in TNX as we saw near the end (yellow arrow) of Q1.

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I’m anxious to see how things play out once quad-witching nonsense is behind us. But, of course, then we have to deal with quarter-end silliness next week.

Futures are currently off 7, even with oil and gas higher on continuing Iran tensions and a huge refinery fire in Philadelphia.Trump reportedly was close to pulling the trigger on a retaliatory strike on Iran last night. Should we be relieved it didn’t happen, or alarmed that it came that close?

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Futures reached new all-time highs overnight, ostensibly on hopes that the FOMC will cut rates in July.  While I’d never discount the importance of Fed guidance, futures were initially reversing lower until oil and VIX opened the door.

First, there was VIX’s breakdown through a very obvious TL.  Algos eat this stuff up.

If that wasn’t enough, VIX put a “shot across the bow” at 4am……when ES had the audacity to balk at making new highs.Then there was CL, which broke out of its falling channel on Tuesday and has ratcheted higher ever since — even breaking out of its rising wedge a short while ago — again, when ES threatened to reverse before reaching new highs. War with Iran might not be good for people (or other living things.)  But, it’s great for algos which feed off of ramping oil prices to produce higher highs in equities.

The more interesting development is the breakout in gold……and the expected drop in the 10Y — which should test 2.00% this morning. As we anticipated, the 2s10s is widening….…thanks to the fact that the 2Y is dropping even faster than the 10Y. Stocks might be ignoring it for now, but this is the most bearish scenario that could play out.

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