Futures are struggling after an overnight ramp job driven by VIX’s retreat from its 200-day moving average. Aside from the technicals, we see more and more analysts echoing our view that a rate cut makes little sense at this time.
Our charts indicate three distinct and very concerning tripwires for equity investors which, depending on what the FOMC decides, suggest substantial downside.
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Futures have rebounded almost .50% after testing recent lows yesterday.
Traders remain focused on tomorrow’s FOMC minutes and Thursday’s CPI print.
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In a speech that was essentially a mashup of all his other recent speeches, Powell reiterated at Jackson Hole on Friday that the pandemic – not historically dovish monetary policy – caused the recent huge spike in inflation. In fact, the Fed should be congratulated for putting out the inflationary fire that they started.
He did mention by way of a little joke that the Fed’s assessment of inflation being transitory was wrong, but that the Fed had plenty of company. Essentially, no harm, no foul.
Now, the Fed is apparently ready to lower interest rates. This view will ideally be underscored by Friday’s core PCE print. The market expects it and, in fact, needs it. But, anything more than 50 bps could be seen as the Fed panicking and could unravel the current rally as it stumbles merrily along.
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Futures are up slightly as the FOMC begins its July meeting. But, it’s a continuation of the consolidation that began last week.
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A lot has happened for RUT in the past week. It was only 11 days ago that we updated its chart, suggesting RUT would reach 2282 by the end of the year.
RUT’s reversal at its .618 in April set up either a Gartley or Bat pattern, meaning a move to its .786 at 2282.27 or its .886 at 2364.78. If we extend the dashed red trend line to the right, we get an intersection with the .786 at the end of the year – a very common scenario. While the .786 in December is a logical next target, an equally compelling case can be made for the .886 in September or October.
Don’t look now, but RUT pushed past the red TL we discussed, allowing RUT to tag 2282 (well, 2278) late last week.
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Already elevated on AAPL’s announcement of a historic buyback, futures popped on a weaker than expected jobs report.
The only problem is that this ramp puts them right back at the top of the channel which has prompted three previous tumbles. Will this one be any different?
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Futures have regained about 30 points after last week’s drubbing.
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Futures tanked overnight on news of Israel’s rocket attack on Iran, only to recover all their losses as we go to press. The latest retaliation is being characterized as a tit for tat.
But it’s easy to imagine the Plunge Protection Team working overtime to calm markets by hammering VIX and WTI back down from their overnight highs.
Meanwhile, SPX came within 1.89 of our 5,000 target yesterday, testing support that continues to be quite important.
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As we suspected, Wednesday’s lows weren’t enough to generate a sustainable bounce. We’re seeing the aftermath of that premature technical bounce this morning.
Our long held bearish position on EURUSD, for instance, is finally gathering a little momentum.
The challenge for bears remains SPX’s 50-day moving average, currently at 5105. If VIX can remain below 18.50, then we could see more meaningful support for equities. If VIX surges past that long term trend line, then the bears could finally have something to celebrate.
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Futures are up modestly as traders look ahead to this week’s important data dumps: FOMC minutes and CPI on Wednesday, initial claims and PPI on Thursday, and Friday’s U of Michigan consumer sentiment.
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