pebblewriter

Tag: COMP

  • Nobody Saw it Coming

    The financial press usually starts to take things seriously about this point in a correction. The permabulls aren’t calling bottoms any more, while the bears are licking their chops. It never fails, someone on TV says something like “no one saw this coming.”

    It’s silly, of course. What they mean is that they didn’t see it coming. Plenty of others did. Some, like us, saw it months ago. This was our Jan 3, 2022 ES chart, illustrating the downside case.

    We reiterated the target, called the bounce over, and nailed down the timeline in late March.

    Now, as we finally approach ES 3997, it seems that more and more mainstream bulls and trend followers are getting bearish (better late than never.)The risk, of course, is that excessively bearish sentiment would stoke another bounce and postpone the 3997 tag. VIX has some thoughts about that.

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  • The Reflation Trade

    Remember how excited the bulls were about the reflation trade? Higher interest rates meant the economy was reopening at a good clip. What could be better than that?

    Things look a little different from the perspective of 3%+, don’t they?

    Nothing alarming here… Remember, it’s not the inversions that bite, but the spikes higher which come after. Futures are off again this morning following a strong jobs report, but we’ve yet to punch through Monday’s lows.continued for members… (more…)

  • FOMC Day: May 4, 2022

    Today’s FOMC meeting is one of the most anticipated and consequential in years. It’s difficult to overstate its importance in terms of economic impact and, perhaps more importantly, Fed credibility.

    Yes, we care about whether the Fed hikes 50 or 75 basis points – though either is unlikely to put a dent in inflation. The bigger question is what the Fed does with its $9 trillion balance sheet.

    Futures are up modestly.

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  • A Fork in the Road

    Yankee great Yogi Berra famously advised that “when you come to a fork in the road, take it.” The S&P 500 is weighing such a decision this morning, having closed Friday at a critical level of technical support.  A rebound from here would buy the Fed a little more time for inflation and hawkishness to ebb. A failure to bounce implies at least another 8-10% downside.

    Which will it be? Fortunately for us, our chart patterns are sending a very unambiguous signal.

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  • The Market is (Still) Broken

    Futures came roaring back into the falling white channel yesterday, revealing what many know but few say out loud: the market is broken. When expectations of a 1% quarterly rise in GDP yield, instead, a 1.4% decline, stocks should decline. Plain and simple.

    The old “bad news is good news” argument doesn’t work any more because the Fed no longer has the ability (at least this coming meeting) to ease in response to a slowing economy. Perhaps they would have if they hadn’t squandered the opportunity to taper months ago, but that’s water under the bridge.

    Instead, we get this massive disconnect which is, at the end of the day, a means of ramping stocks in advance of the bad news we all know is coming via the Fed’s meeting next week: a 50+ bps rate hike. Beyond monetary policy, which is now a headwind instead of a tailwind, we see more and more indications of tough times ahead. As Bill Blain (a treasure) sums it up:

    The world is not what we think it should be. It is what it is…and that is getting less pretty.

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  • Charts I’m Watching: Apr 26, 2022

    ES closed back in its falling white channel following its midday recovery, keeping our target price and date unchanged.

    Note: The current forecast page has been updated with targets for SPX, ES, COMP, VIX, USDJPY, EURUSD, DXY, GC, SI, BTC, CL, RB and the 10Y.

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  • Update on COMP: Apr 25, 2022

    Almost five months ago, we noted that COMP was nearing an important turning point: our 16,158 target. From Close Enough on Nov 19:

    COMP is probably no more than a day or two away from a very significant top.

    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?

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  • Update on USDJPY: Mar 14, 2022

    USDJPY reached our 118 target overnight.

    We charted this target over a year ago [see: USDJPY’s Turn] following USDJPY’s breakout from the falling purple channel [see: The Usual Suspects], reasoning that the Bank of Japan would ramp up the yen carry trade in order to support the Nikkei’s breakout.

    The BoJ rarely disappoints, and they didn’t in this case. The question, now, is how far they’re willing to go.

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  • The Ukraine Crisis Worsens

    Russian troops entered Eastern Ukraine following its formal recognition of the two separatist regions, marking an escalation in the seriousness of the Ukraine crisis.  Futures fell over 94 points from Friday’s close before the algos kicked in and are now down less than 10 as we approach the open.

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  • Bullard Speaks

    In a CNBC interview this morning, Fed President Jim Bullard said “Our credibility is on the line here…”  Anyone paying any attention to the Fed knows that that ship sailed a long time ago.

    Futures have been all over the map, down as many as 55 points before VIX was hammered following a false news report regarding the situation in Ukraine.

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