Stocks are essentially flat following a slight downward revision in Q1 GDP from -1.5% to -1.6% and export numbers which are truly circling the drain.
The disappointing data came on the heels of the worst consumer confidence reading since Feb 2021 and three (so far) Fed presidents advocating a 75 bps rate hike in July.
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Futures are up modestly, backtesting the 20-day moving average for a second day. Time to buckle up.
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Following a series of intraday ramps, futures shot up above the 10-day moving average as soon as the market closed. Bogus? Of course. But, the record will reflect (and the algos have responded to) a seemingly bullish move. Chase it at your own peril.
Today’s tricks will include trying to get past the 10am New Home Sales and Michigan Consumer Sentiment data.
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Futures just backtested the 10-day moving average and our analog trendline, leaving the door open for a pullback – as long as VIX doesn’t get clobbered again.
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WTI spent May 2020 through Feb 2022 in a fairly well-defined channel (below, in white) as it recovered from its pandemic lows. It broke out on Mar 1, however, topping 100 and taking only 5 sessions to reach our 130 target which wasn’t schedule to happen until December.
Since then, it’s seen a series of fits and starts, holding an internal trend line and flirting with reentering the white channel. It’s flirting no more. Against the backdrop of a gas tax holiday and significant demand destruction, it has dropped through the channel top and the 100-day moving average.
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My apologies for today’s post being so late. Our webhosting company just now fixed the “network connectivity problem in one of [their] clusters.” I’d be very upset about it except for the fact that this is the very first time in over two years that they’ve ever let me down. This post will be a retrospective instead of a look ahead at today’s session.
Bitcoin reached our next downside target over the weekend: the dual Fibonacci targets of 17,611/17,692. Like everything else over the holiday weekend, it bounced pretty strongly. And, just like everything else, it won’t last. As we detailed in our last BTC update [see: Bitcoin’s Meltdown] there is substantially more downside ahead.
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Futures are off about 2% following yesterday’s FOMC announcement and press conference – the closest we’ll probably ever get to a mea culpa – which was accompanied by the usual algo nonsense. Suffice it to say, traders have come to their senses and markets are once again reflecting the likelihood of the Fed tightening into a recession.
Our algo remains on track, with much lower prices to come after whatever this bounce amounts to. Note that tomorrow is OPEX and Goldman estimates that options representing a huge $3.4 trillion in notional will expire ahead of a 3-day weekend. No pressure…
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CPI soared to a new 40-year high: 8.6% YoY and 1.0% MoM. Core also exceeded consensus, coming in at 6.0%.
Futures are not amused, as this takes anything less than a 50 bps rate hike next week off the table. A 75 bps hike is suddenly a real possibility.
Needless to say, our analog remains very much on track.
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Per our analog, today is the next significant turning point – important in terms of confirming the direction and distance of the market’s next move. It has done an excellent job of forecasting the reversals, rallies and drops since we first posted it on May 13 [see: Analog Watch.] 
The first time I came across one of these, it worked out spectacularly. I started noticing in May 2011 that the turning points and rallies/declines which had been occurring at that time very closely matched those of the 2007 top.
Just after Day 32 in late June [see: Deja Vu All Over Again] I began laying the entire roadmap which would presumably end with a very sharp drop of around 20% by Day 70. As it turned out, the S&P 500 plunged 19.6% by Day 69. Details are available HERE.
The current analog is different in terms of how quickly things will play out. If it plays out, however, the market is in for much greater losses in the months ahead.
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