pebblewriter

Tag: analog

  • The Year in Review: 2023

    These annual reviews are always interesting. This past year of charting, like most, saw some enormous successes as well as some lessons in humility.  More importantly, though, the markets’ behaviour in 2023 offers vital insight into the year ahead.

    Equities

    As we noted back on Jan 10, 2023 in A Look Ahead at 2023, the market had spent 2022 laying down some very precise cycles.

    …we can see that the lows were exactly 80 sessions apart from one another. We show the cycle pattern in red below. We can also see that the significant highs were all very close to the midpoints of the cycle lows. We show them below in purple… Note that the Aug 16 and Dec 13 highs also backtested the SMA200.

    If the 410.49 high on Dec 13 holds, then a drop to roughly 325.21 (presumably around Feb 7) would put the 70.7% retracement back at the channel top by the time of the next cycle high around Apr 7.

    A drop a little further, to the white .618 at 318.24, would put the .707 Fib at 383.46, still within striking distance of the white channel top.

    We didn’t put all our eggs in the bearish basket, however.

    What if we’re wrong, and there isn’t a big selloff after all? Is there a case to be made for that?

    Unfortunately, yes. And, it comes courtesy of the Dow. While SPX and COMP were constructing well-formed falling channels, DJIA broke out of its channel on Nov 10. It sort of backtested the channel top on Dec 16, but hasn’t yet dealt with the SMA200.

    I would be surprised if it didn’t even backtest the SMA200 – which would mean a backtest of the channel top as well. If it does backtest both, that be a great place for TPTB to take a stand.

    As of [this morning], that would mean a 5.22% drop…about 3775 for SPX and in COMP would mean 10,427.

    As it turned out, SPX chose Plan B – briefly breaking out of the afore-mentioned cycle and channel before dropping to within 0.7% of our 3775 downside target. At this point, it had transitioned from faffing about to outright newtishness, re-entering the falling channel and plunging back below the 200-DMA.

    We had discussed this on March 8 as Powell prepared to deliver hawkish testimony [see: Powell’s Testimony] noting that a drop would threaten a perfectly good IH&S Pattern that targeted SPX 4712.

    SPX has obviously given up the neckline for the IH&S (in white) targeting 4712ish. If it were able to climb back above 4088, that scenario – no matter how unlikely such a rally is – would be officially back on the table.

    A simmering banking crisis had boiled over with the failure of Silicon Valley Bank. The Fed did what it does best and, by making depositors whole, goosed the market back into breakout mode [see: FOMC Day.]

    The initial rising white channel shown above broke down soon afterwards. And, the 200-DMA was tested twice more – even breaking down again in October when Powell delivered more hawkishness. It was enough to get ES down to our 4153 target – an important line in the sand we had detailed in July [see: Fitch Downgrades US.]It didn’t happen as quickly as we originally anticipated, but it happened all the same.

    There were plenty of downside targets available had that support not held. But, it did. As we noted on Oct 31:

    Although SPX’s rising yellow channel has had plenty of wins and losses, the .236 line [tagged on Oct 27] has had a few key saves along the way – notably Dec 2018 and Mar 2023.

    I haven’t put that much stock into it due to the many times SPX overshot or undershot one of the channel lines, but I point it out just in case the year-end run for the barn gets an early start. A drop by VIX through the SMA200 would help the bulls out immeasurably.

    VIX plunged back below its 200-DMA the very next day and the “year-end run for the barn” was officially underway. We looked (to no avail) for backtests along the way.  SPX found its way to 4712 and then some (4793 as of last week), coming up just short of its Jan 4, 2022 highs.

    Currencies

    We focus primarily on the EURUSD, USDJPY and DXY as they have the greatest influence on equity markets algorithms.

    When we posted last year’s forecast [see: A Look Ahead at 2023] EURUSD had recently bounced off of important support and had broken out of a well-formed falling channel as well as its 50, 100 and 200-day moving averages. It targeted 1.1285, but it was running into resistance.

    EURUSD was a very reliable short for the past 1 1/2 years, tumbling in a steeply falling channel through multiple levels of support. Upon completing a Crab Pattern at the white 1.618 in Sep 2022, it began to rebound sharply.

    A common target for a completed Crab pattern is the .618, which in this case is at 1.1285. But, to get there, EURUSD would have to push through some important resistance.

    We later adjusted the upside target to 1.1273, which the pair tagged on Jul 18.  As we noted at the time [see: July 18, 2023 Update on Currencies] this would be a turning point.

    EURUSD tagged our 1.1273 target overnight. It came a little earlier than expected, but it’s a significant development given the pair’s correlation with stocks…This is also a backtest of the broken white channel – suggesting that the next major move is lower.

    We initially set our sights on the 200-DMA, which was reached about a month later. But, when it broke down two weeks later, we focused on 1.055ish. This target was reached in early October at which point SPX/ES needed a bounce in order to hold their 200-DMAs [see: Oh So Close.]

    Naturally, EURUSD came to the rescue, helping SPX bounce even though it hadn’t quite reached its 200-DMA. We looked for EURUSD to bounce to its SMA200. It did so, but had a hard time pushing through until Nov 14.

    By then, SPX’s bounce was well underway. All that was required of EURUSD was to not fall back below its 200-DMA. It did just that, bouncing there on Dec 7 and continuing to urge SPX higher through the end of the year.

    USDJPY began 2023 on the brink of a death cross – which was just as dramatic as it sounds. As we wrote in our Look Ahead at 2023:

    It’s no secret (at least to our members) that currency manipulation has been a central tenet of Japan’s efforts to prop up the Nikkei…[and] the NKD is on the brink of [its own] death cross this morning.

    We were therefore fairly confident that USDJPY would not succumb, but would instead rally sharply in the weeks ahead. The moon shot target was 167, suggested by a recently completed and backtested Inverted H&S pattern.

    For years, the BoJ has walked a tightrope between zero/negative interest rate policy and inflation in order to ensure higher stock prices [see: The Yen Carry Trade Explained.]  As oil prices quadrupled between Nov 2020 and Mar 2022, the BoJ should have propped up the yen in order to temper inflation. This would have been the logical choice…

    While we would never put it past the BOJ to ignore reality and artificially suppress rates, it seems more likely that they’ll at least let rates drift higher over the short run – particularly if oil prices don’t drop even lower.

    Instead, they cried “damn the torpedoes” – holding interest rates below zero and devaluing the yen by nearly 50%. Not surprisingly, inflation shot up to over 4% and JGBs spiked higher as well (at least by Japanese standards.)

    The rally in the USDJPY kept the Nikkei on the rise even as inflation became increasingly problematic. [Note: A plunging yen (soaring USDJPY) helps boost stock prices, but it pushes inflation higher since Japan imports much of its food and all of its oil with those increasingly worthless yen.]

    The Nikkei and the USDJPY both bottomed on the same day that the USDJPY’s death cross occurred and two days before the Nikkei’s death cross.

    Once USDJPY reached its 200-DMA, we looked for a temporary pullback. From the Feb 28 Update on Currencies:

    Therefore, I’m looking for a pullback at these levels but am fully prepared to go long again. The IH&S backtest is complete, and the BoJ is nothing if not determined to keep the NKD aloft.

    After that pullback, USDJPY tested its 200-DMA again in early May before finally pushing through on May 17.  It backtested the 200-DMA again in mid-July. We remained bullish on the pair [see: July 18 Update on Currencies.]

    From there, it was off to the races. All together, it was a very easy to follow progression with the only question being whether we’d get another 200-DMA backtest at the end of the year or USDJPY would push higher.

    With plenty of gains since October, stocks no longer needed the yen carry trade’s help. USDJPY backtested its 200-DMA, where – as of this morning – it has loitered for the past two weeks

    The euro and yen represent about 70% of DXY – the dollar index. So, when we successfully chart the EURUSD and USDJPY, we have a very good sense of what to expect with the DXY. This past year was a successful one in both those pairs, so it’s no surprise that our DXY charting went well too.

    DXY finished off 2022 by nearly reaching our 115.283 target (114.778.) Its steady decline from Sep 2022 to May 2023 held to a well-defined channel and clearly reflected efforts to right the equity ship.

    Of course, the Fed has the same problem as the BoJ and the ECB: devaluing the currency can boost stock prices, but it also fosters higher inflation (the US is a net importer.)

    As the narrative began shifting to a decline in inflation and interest rates, it became necessary for DXY to level off and stop contributing to higher inflation. Thus, it’s been going sideways in a fairly narrow band of 100-107 for over a year. It rallies to the top of the band when stocks need a backtest or to consolidate, then dips back to the bottom of the band when stocks need a boost.

    Our forecast was off the mark somewhat, originally calling for a rise to the 200-DMA after the channel breakout in May followed by a decline to the .618 Fib at 97.72 [Update on Currencies: July 18, 2023.]  We redeemed ourselves, however, with the call for a reversal at 106.28 in October.Oil and gas were probably the most interesting charts to stay ahead of this past year. Following a very easily forecast 2022…

    …2023 was definitely more complicated, with a channel breakout and a channel breakdown with which to contend. Aside from the fundamental issues surrounding OPEC’s machinations, the Ukraine invasion and the Israel-Hamas war, there was math problem to consider.  In order to get CPI back down from 9.1%, the Fed simply had to wait for the effects of falling oil/gas prices to bring the YoY delta back down.  It worked very well.

    And, it made charting relatively straightforward: discern what the desired value for the next CPI print was and calculate where gas prices need to go in order to achieve that value. The fly in the ointment, of course, was knowing just what the FOMC had in mind at any given time.

    So, RB came up a little short of our 4.5485 target in late 2022 and dipped a little lower than our 2.0774 target in Dec 2022. But, we didn’t buy the head fake when RB broke out of the falling purple channel in July 2023, reasoning that the decline would need to continue in order to prevent the 10Y from popping up through 5%.   From FOMC Day: July 26, 2023:

    Given the oil market’s recent breakout and the obvious base effect on inflation, we see a good chance of Powell presenting a more hawkish stance than the overbought market is prepared for…raising the prospect of spike in the 10Y to 4.76% by mid-August. One of the few developments that could prevent it: a collapse in oil/gas prices.

    That’s exactly what happened. The 10Y rose to new highs on RB’s breakout, but plunged from over 5% to under 4% as oil/gas prices retreated. Since Oct 2022, RB has been flirting with reentering the channel from which it broke out.

    Bonds

    Much of our work in bonds has been driven by two very consequential charts: the 10Y and the 2s10s.  We first started posting about the 10Y’s long-term channel back in Dec 2011 when it was around 1.9%.

    I don’t often look at long bonds, but the ten year tsy’s pretty interesting. For those wondering if yields can go any lower, the bottom of the channel is down at 1.40% – a logical turning point.

    Six months later, the 10Y reached 1.394 – where it bounced sharply. Needless to say, this was a strong endorsement of the predictive power of charts [why most analysts eschew chart patterns is beyond us…]

    The chart has become a bit busier over the years, but it has more than proven its worth in forecasting.  Most notably, it allowed us to call the 2012 bottom, the 2018 top, the 2020 crash, and the 2022 breakout, the 2022 top, the 2023 bottom, and the 2023 top.Since this review is concerned with 2023, we’ll focus on the past twelve months.One important axiom in forecasting interest rates is that they can move for many different reasons. While this seems obvious, many analysts focus almost exclusively on fundamental factors such as inflation, economic growth, credit quality, etc.

    We’ve always taken a more cynical view: if central bankers care about equity prices (they do) and they can influence yields (they can) and yields can drive equity prices (they can), then it stands to reason that central bankers would, at times, shape their interest rate efforts around supporting equity prices (boy, do they.)

    Another other issue many analysts ignore is that of flows. Without getting too mathy about it, scary goings on in equity markets can motivate investors to move money from stocks into bonds, driving prices up and yields down. This “fear trade” can easily outweigh the impact of fundamental factors. Conversely, low interest rates can drive money out of bonds into stocks.

    We saw all of these factors at play in 2023, beginning with the bounce at the 200-DMA anticipated in our Look Ahead at 2023 post.

    Our long-time downside target for TNX called for a backtest of the 200-day moving average. It seems highly likely we’ll get that backtest in the next few days.

    Note that the chart also detailed our long-held 4.76% upside target, which would have required a breakout from the rising red channel.

    The 10Y tagged the 200-DMA at 3.33% on Feb 2 and rebounded sharply, reaching 4.04% a month later.   Although we postponed the target date for 4.76% by several months, 4% would remain a ceiling for another six months, at which point it finally made a move [see: The 10Y Breaks Out.]

    What does it mean now that the 10Y has broken out?  It’s a rhetorical question, of course.  A breakout means the bond market is finally calling BS on the idea of a Fed pause/reversal – at least any time soon.

    Had the 10Y stopped at the Fibonacci 4.76, it would have nailed our next upside target right on schedule in mid-August. But, it was destined to reach 5%, which meant either breaking out of the rising red channel or waiting until mid-October.The breakout above the 4.76% Fib and red channel top was a bridge too far for SPX, which had already shed 8.5% off its recent highs. The bottom of SPX’s little red falling channel shown below was violated, resulting in an 11% correction.The nice thing about that breakdown, however, is that it offered a clear sign of how yields can be manipulated to bolster stock prices. As soon as the 10Y reached 5%, and as soon as SPX had fallen more than the 10% mark traditionally considered the max for a garden variety correction, yields began plunging in a suspiciously orderly fashion.As the 10Y gapped lower, SPX gapped higher. In fact, SPX broke out of its falling red channel on the same day the 10Y gapped down a massive 20 bps in a single session. There were three other such plunges between Nov 1 and Dec 13.

    No surprise, but the decline only ended when SPX maxed out at year end – which was a few days after the 10Y dropped below its 200-DMA for the first time in nearly 8 months.

    Santa Claus rally indeed…

    Was 5% a prescribed top? The point at which the Fed would start whispering about rate cuts instead of rate hikes?  It’s interesting to us that stocks bounced exactly where we had anticipated three months earlier [see: PCE in Line, Spending is Not.]

    Powell said in his Nov 1 presser that the Fed would not rule out another rate hike at the Fed’s next meeting in December. Yet the FOMC held rates steady for the second meeting in a row despite economic activity which even the Fed admitted “expanded at a strong pace in the third quarter.”

    Conclusion

    Bottom line, the days of markets reacting solely to fundamentals  – if they ever did – are long gone. A few years ago, JPMorgan estimated that less than 10% of equity volume is driven by fundamental stock picking. The rest? Algorithms and all the things driven by them – which includes all index funds, most ETFs, many mutual funds and plenty of hedge funds.

    Some might shake their fists at the sky and cry “why!?” The more logical reaction is to recognize the patterns and capitalize on them. Chart patterns and technical analysis are great tools. So are quantitative tools which recognize cycles, patterns and algorithmic inputs for what they are: clues to future price movements.

    On that note, we’ll wrap the 2023 review and spend the weekend on the look ahead at 2024. It promises to be interesting.

     

     

  • Charts I’m Watching: Jul 22, 2022

    It’s another one of those mornings where ES is taking its cues from a timely VIX smackdown, erasing a modest overnight loss and promising to add to yesterday’s rally.

    But, today is actually different, with the 10Y gapping lower as stocks creep higher.

    It could be a delayed reaction to yesterday’s sharp selloff in oil and gas. On the other hand, it could be a sign of turbulence ahead.

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  • Fixing Gas Prices

    Gasoline futures (RBOB) have reached our 200-day moving average target set on March 3 [see: The Devil You Know] after having broken out of a falling flag pattern.  Then…

    …nothing would be as effective at punishing Russia and helping to solve the inflation problem as crashing the oil market…If oil does retreat, stocks should too. Reversing at the .786 would be a good start……as would RB reversing at its 1.618.

    …and now.By falling 33% since then, RB has given the economy several gifts, chief among them the opportunity to bring inflation down – if retail follows suit.  EIA reported 4.272 per gallon for the month of March. July is shaping up as 4.41 – a tiny drop compared to futures prices.

    The YoY increase in retail prices would remain elevated at 45%, down from June’s 60.7% but in line with average increases during Mar-May, when CPI averaged 8.46%.

    Even if RB were to decline further, it face falling comps from August 2021. Retail prices remained steady from July to August. So, the onus is now on retailers to make a difference. And, something tells me they’re rather enjoying their windfall profits.

    The top five oil companies – Shell, ExxonMobil, BP, Chevron and ConocoPhillips – saw their Q1 profits triple from 2021 to 2022. ExxonMobil, for instance, netted $2.7 billion in Q1 2021 and $8.8 billion in Q1 2022. It is expected to report over $10 billion in Q2. Taking into account futures prices, it is obvious that the Russian invasion of Ukraine has provided cover for what’s really just good old American greed.

    Meanwhile, equities markets are trying to make sense of the ECB’s 50 bps rate hike (all the way up to zero!)Hate to tell you, Ms. Lagarde, but 0% in an 8.6% inflationary environment with a 2% inflation target is still wildly stimulative – not to mention delusional.

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  • A Better Fit

    Yesterday’s mind-bending rally made very little sense except for the fact that it both washed out many more weak bears and resulted in a more logical placement of ES’ downside target. I’ll explain.

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  • OPEX Strikes Again

    Futures are up sharply… …as VIX is being crushed in order to provide cover for about $2 trillion in options expiring today.

    We’ve been seeing this all week, with multiple downturns reversed by late-session assaults on VIX even as earnings and economic data have argued for lower stock prices. Chase this rally at your own peril.

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  • Oil and Inflation

    WTI has reached our 200-day moving average target posted last month.This is a very significant move which, unfortunately, didn’t happen soon enough to affect June CPI or PPI.

    Long-time readers know that I’ve been harping on inflation for a long time. The reason is simple: math.

    Annual “headline” CPI, which is the one we all fret about, is based on the year-over-year increase in prices – which is why I started worry about inflation in March 2020 after oil and gas prices cratered.

    I did a deep dive on the historical relationship between oil and gas prices and inflation and quickly discovered that the incredibly strong correlation which we began writing about in 2018 was likely to produce some truly scary results.

    Up until late 2018, falling oil and gas prices had been responsible for CPI generally remaining below 2%. This chart from Jan 15, 2019 [see: The Big Picture] illustrated how every time inflation got a little out of control (over 2%) gas prices cratered enough to bring it back in line.

    Interest rates had risen right along with inflation until October 4, 2018 at which point I called a top in both [see: The 10Y Breaks Out.]  The fundamentals didn’t suggest it at all. In fact, more than a few observers questioned my sanity.  But, I reasoned that the recent breakout in rates from a 20-yr channel would prompt the usual response: a sharp decline in oil and gas prices as shown above.

    Trump had been tweeting up a storm with no effect…

    …until one day the Saudis handed him a gift. Journalist Jamal Khashoggi, a thorn in the side of the Saudi crown prince, was murdered and dismembered at what was obviously the direction of said prince. The world was pissed and MBS went from being the “cool Saudi” to an international pariah overnight. Trump suddenly had leverage.  From Coincidences and Consequences:

    Many considered my connecting the dots in this way a bit of a leap, but it was confirmed by Trump himself while being interviewed by Bob Woodward for his book Rage.Long story short, oil and gas nosedived – along with stocks – until they both bottomed out in December. CPI, which had been as high as 2.95% a few months prior, had dropped to 1.55% by Jan 2019.

    The story might have ended there, with oil and gas generally bouncing around as supply and demand and interest rate goal-seeking dictated, but the coronavirus had other ideas. By the time the dust had settled WTI had plunged below our 20 target and finally bottomed out below 0.This meant that year-over-year deltas would remain negative for quite a while. But, importantly, it also means that beginning in early 2021, year-over-year deltas would start soaring – which they did.

    In Mar 2021, we laid out the case for a sharp uptick in inflation and interest rates [see: Big Picture: Oil and Gas] and asked:

    Given that interest rates are close to zero and must remain near zero out of necessity and the dramatic increase in oil and gas prices since last April’s crash would result in at least a 40%+ YoY increase and CPI is very positively correlated with YoY increases in gas prices and interest rates are very positively correlated with CPI, will politicians and central bankers allow oil/gas prices to remain at these levels?

    At the time, I thought not. CPI had reached 2.6% and the 10Y had reached 1.75%. I thought it a likely point for a pause lest CPI pop up over 3.5%.

    But, the Fed — which had fallen under the spell of rapidly rising stock and housing prices — decided otherwise. They advised us to ignore what we could see with our own eyes and play along with their “transitory” fantasy.

    They doubled down and sold Wall Street on the wonders of the reflation trade (remember when that was a good thing?)  A month later, CPI topped 3%. Two months later, it topped 4%.  Tuesday, we learned that has now reached 9.1% – seemingly out of control.

    Many blame President Biden, arguing that his energy policies are responsible for the rise in oil prices and, thus, inflation. While it’s true that WTI rose from 53 to 93 in the first year of Biden’s presidency, the YoY delta in gas prices had peaked at 62% in Nov 2021 and was rapidly declining. By Feb 2022, it had fallen to 41% – historically commensurate with CPI around 5%.

    It didn’t play out that way for four primary reasons:

    1. Putin invaded Ukraine
    2. energy inflation spilled over into most other categories
    3. the Fed was inexplicably still pumping $120 billion into the markets every month
    4. a shortage of journalists willing to be chopped up into little pieces by a Saudi despot

    Reasons 2-4 might indeed have been transitory. We’ll never know. But, it was Putin’s invasion of Ukraine that spoiled the Fed’s plans. Instead of reversing at a very logical Fibonacci level which coincided with the top of an obvious price channel, CL popped up and tagged a target on Mar 7 that we hadn’t expected to be reached until the end of the year.

    Had prices even stabilized at January’s levels, inflation likely would have fallen as the YoY delta fell back to under 20%.

    Even if prices had continued to rise at the 1.73% per month average seen in the first year of Biden’s presidency, it seems likely that CPI would have fallen.Take away the Fed’s profligate QE and Putin’s monumental miscalculation and we might never have seen 6%. Instead, we’ve got this.

    The Fed is finally on the case, raising interest rates and trimming back their balance sheet. But, it’s hard to know how large a decline in stock values they can stomach before at least signaling a pause.

    It’s also difficult to know how deep a recession to expect. I believe we’re already in one. But, how far will the economy fall? Various sentiment surveys and the Atlanta Fed’s research indicate that the decline is gaining momentum.

    Will it spill over into real estate as in 2008-2009? Will rapid wage inflation morph into rising unemployment prints? I think so, but suspect the Fed will blink at some point. The first test will likely be when stocks decline to pre-COVID levels – about 30% from the January highs.

    Last, I’ve no clue when/if/how the war in Ukraine will end – just that it will eventually will. But, God knows how much damage will be done in the interim. Europe is in for a very tough 2022, with inflation spiraling higher thanks to surging energy costs, the plunging euro, and no wiggle room in a slowing economy to preemptively raise rates.

    A broader war with Russia seems increasingly near-fetched.  If they’re really lucky, they’ll merely experience a quarter or two of stagflation. If not, we could be looking at Great Financial Crisis II, with bank failures and spiraling interest rates thrown in for good measure.

    And, don’t think for a moment that it wouldn’t affect the US. The Fed is gambling on a soft landing with nearly full employment. But, it never seems to work out that way, does it? And, would we even want that?

    A soft landing would probably mean energy prices never get to clear. That the proverbial can gets kicked down the road for the next administration/Congress to not handle. I live in California, where gas prices are still well above $6/gallon. I’m okay paying that if it means forcing Putin to back down. It might even accelerate the development of alternative energy so my grandchildren will inherit a planet worth living in.

    But, I’m well aware that I’m in the minority. So, the guys behind the curtain are going to need to come up with some pretty fancy footwork: a plan that keeps energy prices falling, inflation back under 4% and the 10Y back under 2.5% – all without bringing on a recession that sends stocks down 50% and real estate down 20%.

    Personally, I don’t think it’s possible. I think the recession and falling asset prices are not only inevitable, but necessary.  It’s also what our analog suggests.  To that end, here are our expectations for the very exciting next few days.

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  • New Highs for CPI

    CPI reached a new cycle high in June: 9.1% versus expectations of 8.8%. This is the highest print since November 1981. Core came in at 5.9%. Monthly prints were 1.3% headline and 0.7% core.

    The recent decline in oil and gas prices – although substantial – came too late to help mitigate June inflation. The Jun YoY price increase in gas remained strong at 60.73% – among the highest readings recorded in recent years.Futures are dumping on the news, as it clearly takes smaller Fed rate hikes off the table. VIX is even forgoing its usual pre-market dump and breaking out instead.Our analog remains on track.

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  • Don’t Forget the Dow

    I don’t usually pay much attention to the DJIA. It’s a nonsense index that’s manipulated six ways to Sunday and has little following in the investment community. Having said that, the financial press reports on it all the time and the average Joe, seeing this, seems to care.

    As a result, we often see weird things happen in the markets when the Dow reaches significant inflection points. The last great example of this was in the depths of the pandemic crash in 2020. President Trump, who frequently cited the Dow as a measure of his success, was understandably concerned as markets tanked.

    Tweets such as this took on an ever more anxious tone as the plunging Dow approached the level it was when he took office in 2016, with tweets alternating between cheerleading the markets and goading the Fed and Congress into taking action.

    When the Dow finally reached the levels at which it traded on election night 2016, the crash was miraculously over. From our March 20, 2020 post Time to Buy:

    As we all know, the market closed the following session at 18,591, a mere two points above its close on Nov 9, 2016. Some coincidence, huh?

    Why does any of this matter right now?  The Dow is closing in on another of those interesting inflection points: its 2020, pre-pandemic highs at 29,568.

    If the folks behind the curtain have decided that we can’t handle dipping below the “everything is alright” marker, then we could get a nice bounce here.

    If, on the other hand, this time really is different, that support will be breached and investors might just start panicking a little more, down to around 28,800 or lower by mid-July.

    Stay tuned.

     

  • Charts I’m Watching: Jun 13, 2022

    ES dropped over 100 points overnight to tag our 3802 target.

    The other perhaps more significant target to be tagged is the 10Y. It topped our 3.248 target and is currently trading at 3.28.Our analog continues to perform beautifully.

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  • Analog in Play

    Futures are all over the map this morning, with the overnight losses largely erased at one point.

    The key, though, is that SPX bounced back above a key Fib level after tagging its 20% target last week. Although it’s still early stages, our analog is in play.

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