pebblewriter

Tag: Channel

  • USDJPY’s Turn

    Members will recall that one critical component of our oil/gas decline scenario is USDJPY’s breakout from the falling channel from 2017 shown below.  Guess what?

    The yen carry trade is a tried and true method of goading the algos into buying equities – even overpriced ones. It works especially well as a counterweight to falling oil/gas prices as we first observed in 2015 [see: Did TPTB Crash Oil?]

    So, it’s absolutely no surprise to see central banks pull it out of the playbook at a time when folks are suddenly curious about hidden, systemic risks and oil/gas prices are in the midst of a healthy reset.

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  • CPI: MIA

    Futures remained slightly lower following lower than expected initial claims (709K vs 740K consensus) and CPI – which came in at 1.2% annual and 0.0% for October.  Note that it took a plug number outlier +1.2% pop in electricity to keep CPI from going negative.

    One would think if the economy were really all that healthy, especially with the flood of liquidity still being thrown at it, we’d see at least some inflation.  But, hey, we got the 10/20 crosses we were expecting in ES, SPX and VIX. So, the rally is safe…right?

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  • Inflation Tops Estimates…Again

    Let’s talk about inflation. At 0.4%, both headline and core handily beat consensus of 0.3% and 0.2%. Why?

    This morning’s CPI release is a treasure trove of information regarding price action in the general economy.  On an annual basis, energy tanked and food soared. MoM, food was still strong while energy and used cars soared in value.

    So far, the market isn’t concerned. It should be.

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  • Update on COMP: Aug 26, 2020

    It’s been only two weeks since our last update on COMP in which we pointed out COMP might be running out of upside. In that time, the index popped up to an even more compelling reversal point.

    Due to its age, the rising white channel that dates back to 2009 is subject to a little wiggle room. What’s not subject to error, though, is the 2.618 Fibonacci extension at 11643.40.

    Today, COMP reached the intersection of that Fib and the white channel top – a strong sell signal for an index that seems to have forgotten how to decline.The thing is…it’s not the only sell signal our charts are giving us.

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  • Another Yield Curve Warning for Stocks

    Two steps forward…in order to accommodate a big step back.

    We’ve seen it countless times in the lead-up to Fed meetings, GDP reports and, lately, jobs data. With May unemployment expected to top 20% (it’s unofficially already there) after another 7.5 million joined the jobless ranks……the market’s caretakers put a 58-pt cushion into the market.  ES’ 10-day moving average, for instance, is about 87 points below last night’s highs. Had ES instead fallen 87 points from yesterday’s lows, it would mean a risky test of its 200-DMA.

    It’s gratifying to see scores of analysts come to the realization that the markets are being heavily influenced (a more accurate word is manipulated) by massive Fed stimulus. But, as members know, this has been going on for years – particularly as stocks reach key levels of overhead resistance.

    With the Dow finally joining SPX in reaching its 200-DMA on Wednesday and several key components (e.g. AAPL) taking great pains not to break out to new highs, it seemed as though we might get at least a pause in the meltup, maybe even a correction.

    Our yield curve model confirmed it yesterday with the 2s10s breaking out above all recent highs except that seen in late March.Now, we’ll have to wait and see whether the algos, being directed this morning by USDJPY, VIX and CL, are intent on notching new highs or will, temporarily at least, reconcile with the real world.

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  • Update on DJIA: Mar 18, 2020

    In our last dedicated update on the Dow [see: July 2019 Update], we noted the intersection of a number of overhead resistance features in its chart and offered some thoughts on its downside potential if it managed to reverse.

    Note that our 18974 target represents a backtest of the red channel from which DJIA broke out and backtested between 2014-2016 as well as the white 1.618. A May 2020 bottom at 18974ish would align nicely with the SPX 2138 target indicated by our analog.

    I posted my charts on July 29 (the yellow arrow) and was roundly cheered when he Dow cratered 7% over the next two weeks, even closing below its 200-DMA……and was loudly jeered when it made that up and went on to new all-time highs. I’ve seen this sort of thing so often from the Dow that I was pretty hot under the collar. I’m pretty sure an older (yes, there are a few) wiser colleague took me aside and muttered “Forget it, Pebble, it’s the Dow.”

    So, I did. You see, when it comes to manipulation the Dow is the all-time champ: share price weighted, with the ability to kick out losers and slide in winners whenever you like? How is this even an index?

    When the market reversed on cue in mid-February [see: A New Day, Same Old Nonsense]  I don’t think I even checked to see where the Dow was (the blue arrow below.) I’ll admit I got curious when it closed below its 200-DMA on Feb 25. But, I didn’t inhale. I stayed focused on real indices, cratering oil prices and the bond market.Well…guess where it landed today?  Go ahead.  I’ll wait.

    You guessed it. Right where our July 2019 forecast said: the bottom of the falling red channel where it intersected with the top of the rising red channel and the 1.618 Fib extension at 18974. It’s a 33% drop from stem to stern. You can’t make this stuff up.

    Knowing we have a global pandemic on our hands and a minimum of a quarter of negative GDP ahead of us, surely it’ll keep going, right?  I mean, did you hear Bill Ackman today?  Hell is coming!  So, the Dow is positioned for a bounce.  That’s right.  IF oil and gas can continue bouncing, and IF USDJPY can pop up through its SMA200 and IF VIX breaks down and IF the 2s10s craters back below 48 bps, then DJIA will definitely probably bounce.  At least a little.

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  • The Storm Finally Arrives

    After weeks of gathering clouds, the storm we’ve been watching has finally arrived. S&P futures are lock limit down just a few points above our next downside target.

    Not surprisingly, all of our other targets across currencies, commodities and fixed income have either tagged or exceeded our next downside targets, with more to go once the cash market opens.

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  • Decision Time, Again

    We start this morning’s post with a peek at the Russell 2000 as it perfectly illustrates the dilemma facing the broader markets this morning.

    Up until September 2017, RUT followed a well-defined rising channel shown below in yellow.  Like all channels, it was defined by the tops and bottoms along the way. The only problem: The channel was rising only about 5% per year – hardly enough to get excited about. By late 2016, it had become obvious that algos had more influence than discretionary, fundamentally-oriented investors. The algos were, in turn, influenced by certain factors which central banks and their proxies could usually control quite easily.  By wagging the tail (the factors) the whole dog (the market) would usually fall in line.

    In September 2017, after RUT had been bumping up against the top of the rising yellow channel for over 9 months, the factors went to work and RUT  broke out of the yellow channel and rose 21% over the next year. The slope of the new rising white channel was good for about 20% per year.

    Everything was going well until September 2018 when RUT topped out at 1742 and plunged 27% in only three months. To make matters worse, the new rising white channel broke down and RUT fell back below the top of the yellow channel from which it had broken out.

    It spent the better part of the next year trying to break out of the yellow channel again – failing seven times until Dec 4, 2019, when it finally shot above the channel top and remained there. There was a scare last month when, on Jan 31, it successfully backtested the channel top and bounced 5.5%.

    Given yesterday’s carnage, though, it has fallen back to the top of the yellow channel where it faces that same important test all over again.  If it holds, all is well and investors can go back to mindless trend following.

    Even if it doesn’t, the SMA200 is now up to 1574, a modest 3.3% below yesterday’s close. But dropping through 1616ish would mean breaking down below the horizontal support (which served as overhead resistance between Oct 2018 and Dec 2019.) It could accelerate losses and complicate the rescue mission.RUT is typical of many of the indices and individual equities I chart every day. The Dow, for instance, faces a similar test at 27,700.And, SPX and ES completed important backtests (the purple channel top below) in the process of tagging our next downside targets yesterday.Given the way the factors are behaving this morning, there is a good possibility that we’ll see additional backtest targets such as DJIA 27,700 tested today. But, that would mean taking a chance on the algos’ ability to rescue stocks from some very risky waters.

    Stay tuned.

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  • Because Appearances Matter

    It’s not too surprising that there’s been a firm floor under oil and gas prices, given the upcoming Aramco IPO.  But, isn’t it funny how CL has popped above its SMA200 every single day this week, even in the wake of dismal inventory data?

    Just like it’s funny that ES, which pretty obviously should have given up all its overnight trade data related gains should have given up at least most of them after the Reuters laid a little trade truthiness on us.If it had done so before the close, ES would have put in another bearish-looking daily candle.  But, it waited until later in the evening, which allowed ES to leave a bullish candle in its wake.  Funny how that happened.VIX is well-known for timely “breakdowns” that last anywhere from a few seconds to a few minutes which remind the algos of the glory which awaits them if they’ll simply buy-buy-buy.  Today, like yesterday, it hit at exactly 9:00 AM – about the time futures were trying to decide whether the market should open in the green or the red.  Watch for it to happen again if stocks should have the nerve to slip lower.But, the champion of bullish appearances has to be the USDJPY, which has reminded us of its incredible upside potential over the past month, repeatedly pushing above its SMA200 and pumping the Nikkei 12% in the process.Combined with timely soundbites from the White House on the incredible successes being achieved on the trade front, the market can’t be blamed for ramping higher most every day.  But, what happens if the narrative changes?  What happens if one or more of the factors fueling the machine runs dry?

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  • Can Boeing Take Off?

    A reminder: our current membership promotion — which slashes the price of a quarterly subscription from $399 to only $299 — is slated to expire tomorrow, July 23.  For details and to sign up now, CLICK HERE.

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    BA has just about reached our channel top target from Jul 3.  From Algos to VIX:

    BA’s [chart] indicates another interim bottom.

    It has now bounced over 12% since our Jun 3 bottom call signaled by ES’s 2.24 tag and has nearly reached the top of the new, gentler falling purple channel, now at about 380.  It’s an important test for the stock — boosted by a monumental PR and its on-again off-again stock repurchase plan.

    Note that the current forecast page has been updated for all major charts including

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