Futures are down modestly, backtesting the SMA10 they soared above last week. Interestingly, though, the moving averages remain bearishly aligned.
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Posts
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Charts I’m Watching: May 8, 2023
Futures are slightly higher in the lead up to Wednesday’s CPI print.
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NFP Complicates Fed’s Plans
The 253K increase in nonfarm payrolls handily topped the 180K consensus. Likewise, unemployment dipped to 3.4% versus expectations of 3.6% and average hourly earnings printed a 0.5% increase versus expectations of 0.3%.
To be clear, this is not the kind of slowdown that would encourage a Fed pause or pivot. Yet, VIX has been hammered by 8.5% overnight, so futures are up over 30 points.
At what point will the market begin to believe the Fed’s “higher for longer” forecasts?continued for members…
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Aftermath
Futures are off modestly after a more hawkish Q&A with Powell than many expected. ES came within a few points of the 50-day yesterday. Based on the overnight action, it should reach our next downside target with ease.
It didn’t help that unit labor costs shot up 6.3% for April versus the 3.3% prior and 3.6% consensus. Perhaps the three rate cuts the market has been pricing in by year end don’t constitute such a great forecast.continued for members… (more…)
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FOMC Day: May 3, 2023
Futures are essentially flat ahead of today’s pivotal FOMC decision and press conference. This follows a day that saw stock prices plunge below our initial backtest target…
…as VIX actually broke out – at least for a few hours. 
The banking crisis obviously hasn’t gone away. How many more First Republics or Silicon Valley banks are out there – clicks away from a bank run? Even those banks which aren’t already in trouble will most certainly cut back on lending, which will certainly raise the odds of a (worse) recession.Will the FOMC take that into account as they contemplate future actions?
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FOMC on Deck
Futures are off modestly in the run-up to tomorrow’s FOMC decision.
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Price Setting
After establishing a well-formed falling channel and positioning for a bearish 10/20 cross, SPX soared last week on – what else? – another collapse in VIX.
In the process, the 10/20 cross was (at least) delayed and the channel busted. It’s normal activity for the lead up to a Fed meeting. Perhaps “price discovery” should be renamed “price setting.”
Perhaps we shouldn’t be surprised to see similar goings on in other “markets” such as silver.
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What Goes Up…
Yes, it was way overdone. And, yes, it was the VIX action we had highlighted. Specifically, it was VIX’s 16% “breakdown” from Tuesday’s highs that sent the algos into a frenzy.
Unfortunately for the bulls, ES was driven right into overhead resistance.
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Q1 GDP Disappoints
GDP increased at an annual rate of 1.1% versus expectations of over 2% and Q4’s 2.6%, fueling both recession fears and expectations that the Fed will soon halt rate hikes after next week’s 25 bps increase.
Futures dipped on the news but have since rebounded as the usual VIX smackdown convinced algos to look on the bright side.
For now, algos are ignoring the hotter Q1 PCE data embedded in the GDP print.
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Durable Orders’ Mixed Bag
There’s something in March’s durable orders report for both bulls and bears. The 3.2% topline number was wildly better than the 0.7% expected and -1.2% previous. But, it was driven primarily by large Boeing orders.
Non-defense capital goods excluding aircraft, a proxy for business spending plans, dropped 0.4%. And core shipping logged another 0.4% drop.Stocks were little phased, as they’re still marching to VIX’s drumbeat. But, the 2Y is back below 4% as First Republic reminds us that the banking crisis has not gone away.
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