Yesterday, futures broke out of a very well-formed falling channel for the second time this week. Will it stick this time or is this just typical OPEX nonsense?
continued for members… (more…)
Tag: Dollar
-
Charts I’m Watching: May 21, 2021
-
Live by the Algo…
Live by the algo, die by the algo…so the saying goes. ES continues to make good progress toward our downside targets, with the usual assistance from currencies and commodities AWOL so far.
continued for members… (more…)
-
PPI Confirms Hot Inflation
It comes as no surprise that PPI confirmed yesterday’s hot CPI print, coming in at a whopping 6.2%.
We’ve been beating the inflation drum for so long, it feels a bit anticlimactic to acknowledge that it’s finally here and even slightly greater than we anticipated.As regular readers well know, I expected central bankers to preemptively head off the problem of higher inflation and higher interest rates by crashing oil/gas prices as they have many times before.
I was surprised to see them pass on this approach and roll the dice with inflation. But, it made more sense once it became apparent that they had essentially taken control of the bond market – the one market that had always “told the truth” about economic conditions. No more.
As strong as yesterday’s equity selloff was, the 10Y barely budged, rising from a high on Tuesday of 1.63% to a high on Wednesday (after CPI was announced) of 1.69%. Today, yields are actually dropping. An orderly channel like the one below is all you need to confirm that yields are being carefully managed.
* * *
Speaking of carefully managing things…I can only imagine the panic around the Fed, the Treasury and the White House when the Colonial Pipeline fiasco popped up the other day. Higher oil/gas prices had helped get stocks to their recent highs, but it was time for the market’s caretakers to take their feet off the gas lest inflation be even more alarming.
A shutdown of the nation’s largest fuel pipeline certainly wasn’t part of the plan – though I wouldn’t be surprised if the hackers had placed some well-timed bets on oil/gas prices in advance. With markets going crazy over inflation, something had to give.
I had the following conversation on this very topic with a very good friend who happens to be both brilliant and an excellent trader. But, he’s nowhere near as cynical as I am. We chatted just after the close.
Less than ten minutes later…
RBOB futures are off nearly 6% from Friday’s highs.* * *
With futures having already dipped below the SMA50 to tag a key target earlier this morning, the bounce should continue given the algo action focused on VIX.
continued for members… (more…) -
Charts I’m Watching: May 6, 2021
Futures are flat after tumbling to and holding our backtest target yesterday morning. But, pay no attention to stocks just yet. They should continue to be under pressure, with the real action in oil and gas.
continued for members… (more…) -
Still Not Transitory
At some point – perhaps after six months of hot inflation data – the Fed will be forced to admit that inflation pressure are not transitory. This morning we saw evidence that March personal incomes spiked by 21.1%, the most since 1946. Personal spending for the month shot up 4.2%, the most since last June. And, PCE’s 2.3% is the biggest since 2018.
S&P futures are calling BS on the whole modest/transitory inflation story – off over 20 points so far.
And, VIX’s bullish (bearish for stocks) 10/20 cross hasn’t gone away.continued for members… (more…)
-
Update on Oil & Gas: Apr 26, 2021
March durable goods orders disappointed this morning, coming in at 0.5% versus the 2.3% rebound expected after February’s -1.2% flop.
We couldn’t help wonder whether the data were somehow related to the first (tiny) breakdown in RBOB prices since the Mar 23 lows.
Given that oil and gas are poised to deliver a huge increase in CPI for April, this might be a good time to review where we are and where we’re headed.continued for members… (more…)
-
Charts I’m Watching: Apr 21, 2021
Futures are backtesting the 10-day SMA this morning in the wake of the first two day decline since March.
Look for more to come.continued for members… (more…)
-
Last Call
Despite a few tense moments midday, ES held the TL of support from last Wednesday and has rebounded to within 7.50 points of the important Fibonacci extension and channel top at 4153.62.
Will the substantial overhead resistance at these levels matter this time? We’ll know very, very soon.continued for members… (more…)
-
CPI’s Head Fake
This CPI data is significant in that it shot up over 2% – the highest since 2018 when the prints of 2.95% (July) and 2.70% (Aug) sent the 10Y up to 3.25%.
But, it’s the inflation happening right now, which will be reported next month, that the Fed is worried about.As we’ve anticipated, March’s 2.6% YoY print was largely the result of a large (22%, should be 28%) increase in gas prices. Though clearly non-transitory food, utilities, used cars and medical services all played an important role.
The data next month, however, will put this to shame. As things stand now, April 2021’s gasoline prices (2.77) are up a whopping 60% over 2020 prices.
As we’ve discussed many times, this should put CPI at over 3% – perhaps closer to 4%.
The Fed seems to be betting that it can divert attention from the coming data. And, maybe they can, as bond prices seem to be immune to this data and the recent blowout PPI.
But, it remains to be seen whether the usual algo tricks will be able to handle a CPI print of over 3%.continued for members…
-
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.
continued for members…
