pebblewriter

Tag: Dollar

  • Jawboning an OPEX Rally

    Yesterday’s 1.2% spurt higher was driven not only by the usual push in USDJPY and plunge in VIX, but a healthy dose of hopium regarding the debt ceiling crisis. Congressional and White House reps were nearly unanimous in declaring that a deal is as good as done.

    Whether they’re speaking the truth or simply trying to avoid a market meltdown a la 2011 remains to be seen. Both SPX and ES saw a bullish 10/20 cross, but it could unwind if ES closes back below the former resistance at 4166. Keep on eye on the ever proficuous VIX, which usually triggers algos to buy any significant dips by breaking below support such as the purple channel bottom below.

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  • Debt Ceiling Worries

    We’re starting to see cracks in the equities and bond markets related to the debt ceiling. Interest rates are ratcheting higher. And, although OPEX-related maneuvers are working to prop up stocks, we had a momentary breakdown in SPX yesterday.

    Utilities, a bond proxy for some, have taken a big hit this week as investors shift into shorter-term, less volatile treasuries.

    Which would you rather own, XLU with a beta of .56 and yield of 3.01% or a 6-mo Tsy paying 5.25%?

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  • Bank Concerns Are Back

    After a brief respite, bank stocks are again under pressure with deposit flight and CDS both pointing to escalating concerns.

    Neither the April CPI nor PPI prints support the notion that the Fed will lower rates any time soon – keeping the pressure on banks and an economy that depends on easy access to cheap credit.

    Futures backed off the key 4166 threshold again yesterday, only to bounce back and test it again overnight.

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  • Aftermath

    Futures are off modestly after a more hawkish Q&A with Powell than many expected. ES came within a few points of the 50-day yesterday. Based on the overnight action, it should reach our next downside target with ease.

    It didn’t help that unit labor costs shot up 6.3% for April versus the 3.3% prior and 3.6% consensus. Perhaps the three rate cuts the market has been pricing in by year end don’t constitute such a great forecast.

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  • Algos Take Charge

    ES is up 1.3% in the past week. All it took was a 15% beatdown in VIX.

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  • On the Bubble

    Our yield curve model sounded the alarm on Friday. But, by the end of the day, it had backed off and cooler heads prevailed.

    It’s important to recognize, however, that it remains on the bubble, with only a few basis points standing between a rally and another leg down. From a fundamental standpoint, there seems little doubt that the odds of a recession are on the rise.

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  • Powell’s Testimony

    Bottom line, a 50 bps rate hike is back on the table. We got the backtest we expected, and even a little bit more. This morning’s ADP employment report further underscores the need to put the brakes on the economy. It will be interesting to see whether Powell’s tone becomes any less hawkish in light of yesterday’s sell off.

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  • Fed Whispering

    The FOMC’s meeting gets underway today. Like most, this one seems very consequential. The Street is divided on whether or not the Fed has done enough to combat inflation as well as the necessity of a recession.

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  • Charts I’m Watching: Jan 23, 2023

    Futures are essentially flat this morning after Friday’s OPEX panic to regain the 200-day moving average.

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  • The Next Tests

    Futures are flat following yesterday’s sharp selloff credited to the economic slowdown in China and hawkish Fedspeak. SPX closed below its 10-day moving average for the first time in 3 weeks, but is clinging to an important Fib level.

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