With over $2 trillion in equity options expiring today, is it any wonder that in the past hour the futures market went from this…
…to this?
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Posts
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Another Good News is Bad News Story
Unemployment claims came in lower than expected, further dashing the hopes of those praying for a Fed pivot. Meanwhile, the OPEX levitation continues.
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Housing Takes Another Hit
It’s no wonder homebuilder confidence fell so sharply…
…since they knew about the decline occurring in permits and starts. This is the worst print since the depths of the pandemic in June 20 and is precisely what we warned about in July 2021 [see: Time to Sell Your Home?]
Recall that in the 19% house price correction between 2007-2009, the peak in starts preceded the peak in prices by 14 months. But, prices had already dipped lower – between Jan-Jul 2006.
The Fed saw the writing on the wall, halting the steady rate hike which had started in June 2003 at 1.0%. But, it was too late. The unwind had started, and prices would drop until Jan 2009 – much longer than that for many homeowners.
Futures had already rolled over, but this was more fuel to the fire.
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Charts I’m Watching: Oct 18, 2022
Another OPEX week overnight ramp…same cast of characters, same outcome.
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Charts I’m Watching: Oct 17, 2022
Pretty standard fare for an OPEX week…futures have ramped 1.6% higher on a bounce in USDJPY and CL and a trounce in VIX.
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It Wasn’t Oversold
It was amusing, yesterday, listening to various on-air personalities try to explain why the market made such a “historic” reversal. The one I heard more than any other is that it was deeply oversold – which is just not true.
It was somewhat oversold on Sep 27, but RSI made a higher low yesterday as stocks reversed and shot higher.No, the historical rebound was all about COMP reaching support and VIX collapsing on cue – same as countless other times – with a healthy dose of short covering. Unless I miss my guess, it was only a historical headfake.
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Update on COMP: Oct 13, 2022
In our last update on COMP [see: Apr 25, 2022 Update] I noted that after reversing within 0.3% of our 16,158 upside target in November 2021…
…COMP had dropped to our 12,813 downside target three separate times. 
I wondered what it would take for COMP to reach our next lower target at 10,122.[Last November] we identified two downside targets: 12,813 and 10,122. COMP topped out at 16,212 the very next session and reached 12,813 on Feb 24. And, again on Mar 14. And, again today. What the heck is going on? After three separate attempts, is 10,122 still on the table?
As we found out earlier this morning, 10,122 was definitely on the table. In fact, tagging it has touched off one of the biggest single-day bounces we’ve seen in ages.
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CPI’s Big Miss
Core CPI increased 6.6% from a year ago, the highest level since 1982, and 0.6% MoM. Consensus was for 0.4%.
Headline increased 8.2% YoY and 0.4% MoM versus consensus of 0.2%.
Bottom line, there’s no reason to believe the Fed will pause their rate hikes any time soon.continued for members… (more…)
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PPI Tops Consensus Again
For those looking for inflation to top out, today’s PPI report of 0.4% versus 0.2% consensus was a disappointment.
After ramping sharply overnight, futures are now trying to hold on to meager gains.
Meanwhile, the yen has plunged to levels not seen since 1998. If USDJPY tops 147.65, the previous high was back in 1990. The BoJ’s commitment to the yen carry trade is astounding. Talk about “all in…”
Don’t wander too far from your computer. Fed minutes are due out at 2pm ET today and CPI comes out tomorrow morning.continued for members… (more…)
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Our Analog: Then and Now
Futures have been all over the map this weekend following the breakdown of the small white flag pattern on Friday. But, the key factor is that VIX is higher and should experience a golden cross as we approach PPI tomorrow and CPI on Thursday.
Our downside targets remain unchanged with SPX now within a few percent of our analog’s target from this past May [see: Analog Watch.]continued for members… (more…)
