pebblewriter

Tag: DJIA

  • The House That Jay Built

    You know things are getting real when ES closes below its 50-day moving average.  It has bounced at that support 9 times in the past year. When the 50-DMA fails, the 100-DMA has provided support 6 times since Jun 2020.

    With ES closing below its 50-DMA yesterday and likely to reach its 100-DMA today, is it finally time for a test of the 200-DMA?

    The stakes are high, as VIX pulled back after reaching important resistance at our 32.50 target yesterday.

    Meanwhile…inflation, the Fed policy choice that pundits are mistakenly calling a “mistake.” Sure, it delivered a body blow to the have-nots, but It provided record high stock and real estate prices to the rest of us.

    November CPI is due out next Friday, and we are still looking for it to mark a turning point in this cycle. WTI is off 23% from its highs – technically a bear market.  And agricultural commodities have backed off their breakout and are eyeing a potential breakdown.

    Our assumption remains that CPI will be back below 3% by the time the taper is complete. Sorry savers, but there probably won’t be any need to raise rates any time soon, if ever.

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  • Charts I’m Watching: Dec 1, 2021

    The algos have been busy overnight again, driving futures up 50+ points as we head into the open. Omicron shutdowns, botched responses and Powell’s admission that the Fed might accelerate the taper seem to have been forgotten.

    ES came close to our next downside target, but whiffed. Is the correction over?

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  • CPI: Out of Control

    CPI soared to 6.24% YoY in October, well above the 5.9% expected and the highest since Nov 1990. The MoM print of 0.9% and the Core CPI print of 4.2% also came in hotter than expected and set multiyear records. Put simply, the Fed has lost control.As we’ve discussed, inflation continues to become more broad-based than the oil/gas-driven effect initially seen earlier this year.

    The chart below shows the divergence from May-September and illustrates the importance of oil/gas prices to future inflation prints. If gas prices were to level off at today’s levels, the direct effect on CPI would cease in November. However, even if the base effect were to roll off, the other categories are now equally problematic. Futures are off 20 points on the news, with several key factors indicating more to come.

    Today marks the point at which the Fed officially stops cheering on the reflation trade.

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  • PPI Soars, CPI on Deck

    Producer Prices for Final Demand in October jumped 0.6% MoM and 8.6% YoY (6.2% less food, energy and trade.)Futures were little changed… …though the 10Y slipped to a cycle low of 1.43%.

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  • Out of Sync

    SPX tagged a significant Fibonacci extension Friday, but ES came up short of its equivalent target at 4728. Meanwhile, CL is faltering and USDJPY is rolling over as VIX faces a bullish 10/20 cross. What does it all mean?

    Surprisingly, the answer might lie with the bond market.

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  • Charts I’m Watching: Nov 5, 2021

    The 531K payrolls beat and Pfizer COVID-19 pill could influence the taper schedule. The 4.9% increase in wages should.

    Energy and food prices might well fall over the coming months. But, wages are sticky. Whether due to contracts, minimum wage rules, or just market forces, they are very difficult to reduce. While it’s true that workers need higher wages in order to keep up with spiraling cost inflation, this is undoubtedly more fuel for the non-transitory inflationary fires.

    Futures are up sharply on the news, which has the factors wondering what to do at ES 4700. Having delivered stocks (with a few trillion in help from the Fed) to all-time highs despite lackluster and occasionally bad news, what should they do with really good news that might speed up the taper?

    Stay tuned.

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  • Charts I’m Watching: Oct 21, 2021

    Futures are off slightly this morning, passing on the opportunity to make new highs in the after-hours.

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  • Monday Morning Meltup

    Futures are continuing their meltup in the pre-market on a 4% bounce in crude oil and the usual overnight slump in VIX.

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  • Charts I’m Watching: Jun 21, 2021

    ES came within 9 points of our next downside target before getting a nice bounce motivated primarily by USDJPY, which was working flat out to save the NKD from a scary, and long overdue dive to its SMA200.

    This bounce will be quite important to the bulls, who are no doubt hoping to avoid a bearish 10/20 cross.

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  • Bullard: Wait, Did I Say That?

    Not that futures needed any help melting down this morning, but Jim Bullard just poured gas on the fire. Yes, Jim Bullard! The Fed president who never had a hawkish thought in his life.

    Then, he trashed the Fed’s most nonsensical policy: throwing $40 billion per month into the mortgage market when mortgage rates are already at all-time lows.

    Bulls better hope that ES can bounce at our next downside target: the 50-day moving average currently at 4174.

    It appears that algos are finally being given the green light to (drumroll please) decline.

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