pebblewriter

Tag: Dollar

  • Winners and Losers

    Watching WMT this morning and wondering what it all means?  After surging nearly 7% on blowout earnings, the stock has given up all its gains after the company’s commentary confirmed the obvious: there are winners and losers in a pandemic.

    Unlike many of its general retailer competitors…Walmart sells groceries, meaning they were allowed to remain open even during the worst of the virus’ spread. They also have a substantial online business, helping them offset the slowdown in in-store shopping. Last, customers who might otherwise have run out of money when laid off received checks from the government which allowed them to continue shopping for low-priced essentials.

    The problem WMT faces, of course, is what happens now that these checks have stopped. Will the stock recouple with the economy? Moreover, will the overall market recouple with the economy?

    The old adage that “the market is not the economy” has never been more true. Pundits and politicians see major indices push to new highs and declare that the worst is over. The reality is that the AMZNs and WMTs of the world are simply taking market share from the millions of small businesses that couldn’t stay alive for the past five months.

    For all the major retailers which have declared bankruptcy so far this year…

    …there are hundreds of thousands which have done so with no fanfare nor headlines in the WSJ. They slip quietly away into insolvency as their PPP money (if they were able to obtain it) runs out and the bank account runs dry.  They’re not publicly traded, so they don’t affect the market. But, the effects will be felt sooner or later. And, more will join their ranks as the country continues to fail the coronavirus marshmallow test.

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  • PPI’s Big Beat

    PPI was expected to tick 0.3% (0.1% core) higher in July. Instead, headline PPI soared 0.6% and core popped a stunning 0.5% – the highest since October 2018.

    The impact on stocks has been muted so far, as the market is still giddy over the potential release of what is essentially a Phase 1 vaccine out of Russia. The impact on bonds, however, has been significant. 10Y yields have broken out of a long, slow decline.

    When you’re piling on debt (with record-setting duration) the way the US is, higher interest rates are not good news.

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  • Crossing the Rubicon?

    ES has reached the top of the falling white channel we added a couple of months ago.  At 76 points below all-time highs, a 2.2% move higher would make quite a statement about the integrity of the S&P 500 – essentially that a connection between equity prices and macroeconomic conditions is no longer a reality, nor even a consideration in investing. Imagine future FOMC press conferences and the derision that pretenses to the contrary would invite.

    Is the Fed ready to cross the Rubicon? Or, could this finally be the end of the road?

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  • Thinking About…a Correction

    Will the addition of another “thinking about” keep stocks aloft until the next FOMC meeting?  Futures aren’t looking so hot, perhaps because WTI has now joined RBOB in breaking trend, 10Y yields have gapped lower, and VIX broke out of its falling wedge. The algos are not happy.

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  • Pop and Drop?

    There’s a lot to unpack this morning, as several targets were tagged overnight.   USDJPY finally popped up to tag its 200-DMA……which enabled ES to come within 1.43 of our 3076.93 target – the 2.618 Fib extension of the drop between 2007-2009. I thought this was going to happen over the weekend, but better late then never.

    It’s been a while since we had a nice pop and drop. Stay tuned.

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  • Update on Bitcoin: May 28, 2020

    I’ve only posted about BTC once before, back on Mar 23 in response to a member request [see: FOMC Embraces MMT.]  The Dow was about to test its 2016 election day lows and, not coincidentally, the Fed had just unleashed QEinfinity.

    The post went as follows:

    Two major chart patterns jump out at me: first, the obvious triangle pattern on the weekly arithmetic chart (it isn’t there on the log chart) suggests BTC should bounce from here and return to the top trend line (which failed, BTW, to hold a recent tiny breakout.) It currently stands around 9,925.Second, the daily log chart shows a TL was broken last week but BTC has since rebounded back above it. For those wondering, the retracement of the rise from the Dec 2018 lows to the Jun 2019 highs reached about 81%. Had the TL held, we’d be looking at a Fibonacci 78%.

    If you believe that BTC will necessarily rise (as gold will) as QE explodes, the charts support a continuing bounce. If you believe the FOMC will do whatever it takes to support the USD and crush surrogates such as BTC and GC, then keep an eye on that TL (5,000ish) as a fairly clear stop level.

    Having spent a few hours studying Bitcoin, I promptly forgot about it.  I don’t really follow it, and believe it’s at least as heavily manipulated as everything else. Probably more. But, thanks to member John K., I was encouraged to take another look.

    As it turned out, BTC did continue its bounce and went on to test the top trend line, reaching 9917.25 on May 8.  It was an impressive 100% move from the March lows.

    Of course, now it’s back at overhead resistance – the same trend line from December 2017 which halted the 2017 and 2019 rallies.We’ll take a look at the potential for a reversal or a breakout.

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  • Yield Curve Warning

    In a bit of a delayed reaction to Treasury’s announcement of its $3 trillion borrowing needs in Q2, the 2s10s has pushed above the white TL connecting all-time lows – a clear warning, should it last, for equities.

    Meanwhile, CL backtested its Feb 2016 lows and USDJPY broke down at about the same time that ADP announced another 20 million job losses (roughly in line with Friday’s NFP.)  All of this came on the back of dismal earnings from market darling Disney.

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  • Time for Bulls to Get Nervous?

    SPX needed about 22 points downside to reach the support of its SMA50, a rising channel bottom, and a falling channel bottom.  ES, which finally reached our 2655 target from last week [see FOMC: Endgame] is currently off 30 points. At this rate, SPX will breach its support on the open, especially if USDJPY doesn’t bounce here at its new lows.Is it time for bulls to get nervous?

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  • Backtest Accomplished

    Members, remember to request access to @pebbletrades if you’d like intraday notices of important updates.  Only about 20% of you are currently signed up, and I’d like to use it more often to signal when important target tags or changes to a forecast occur. If your identity isn’t discernible from your Twitter handle, drop us a line so we’ll know to approve you.

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    SPX/ES backtested their necklines in dramatic fashion yesterday.  As we discussed, they had their choice of a gentle sloping path (which stretched to Wednesday or Thursday) or a sharp plunge.

    SPX opend off 13 points and never looked back.  The losses accelerated until it reached our downside target and VIX reached our 21 target — also a backtest.

    The swift recovery in the closing hour and the overnight ramp job send the message that the worst is over for now.  But, of course, we’ll want to see some follow through for confirmation.

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  • Update on Gold: Dec 26, 2018

    Back on August 15, we noted that gold was nearing an important downside target.  From Charts I’m Watching: Aug 15, 2018:

    [Gold] has reached triple support –the .618, yellow TL off the 2011 highs, and the red TL from 2010.  We’ve targeted 1173.60 since the yellow TL broke down in May and gray channel broke down in June.  I strongly suspect it will bounce here.

    GC dipped slightly lower, bottoming out at 1167.10 the following day, then began an arduous climb that reached our 1268.30 target last week.

    As it threatens a breakout, we’ll take a fresh look at the road ahead.

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