pebblewriter

Tag: Dollar

  • Charts I’m Watching: Nov 22, 2021

    Futures melted up overnight with boosts from VIX and USDJPY.

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  • Update on Currencies: Nov 17, 2021

    EURUSD  tagged our next downside target overnight: the .618 Fib at 1.1285. As we discussed in last month’s currency update [see: At The Brink] this breakdown below support has been instrumental in helping DXY achieve our long-expected breakout.

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  • DXY: Finally Breaking Out?

    Stocks tumbled yesterday on inflation numbers that call into question the pace of the Fed’s taper and rate increases. Then they rallied overnight on an 11.4% collapse in VIX. The most significant chart on my screens at the moment, though, is the US dollar. DXY has had great difficulty breaking out of a tightly controlled consolidation pattern that dates back to July 2020. It tried this past September, but was smacked down to support stocks’ recovery from that terrifying (sarc) 5.8% slump.Now, it’s making another bid for a breakout — one we’ve been expecting for months (a very lonely stance BTW) — which wouldn’t bode well for stocks. Is this one for real?

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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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  • The Countdown

    It’s easy enough to engineer a meltup in advance of a Fed meeting. We’ve seen it countless times. But, what about after a meeting, particularly one where an actual taper or rate hike is announced? The countdown has begun. Stay tuned.

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  • The Big Picture: Oct 27, 2021

    Equity markets rarely fail to rally into the end of the year.  But, there have been several noteworthy Q4 exceptions over the years, each of them marked by VIX’s bounce off well-established trend lines.

    Note that SPX’s yellow channel has been rising at a compouned 12.2% per year since the 2009 bottom – historically a very decent rate of return.  With SPX currently testing the channel top as VIX tests the rising purple trend line, SPX is at a critical juncture where it must either correct or break out.

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  • Judging the Fed

    In an excellent interview on CNBC this morning, Paul Tudor Jones echoed what many on Wall Street have been thinking and we have been writing for the past year or so.

    Has the Fed committed a policy mistake? Most certainly. Even more outrageous, it did so deliberately.

    If yours truly, sitting in his home office with a Mac Pro and a public school MBA, can accurately forecast soaring CPI long before the convenient supply-side disruption pretext came along — then the Fed’s brain trust of MIT grads with supercomputers certainly saw it coming even sooner. How did they respond (besides protecting their own portfolios)?

    1.  changed their inflation target language to accommodate higher inflation
    2.  lied about their expectations of it being transitory
    3.  continued to pour $120 billion per month into fixed income markets
    4.  manipulated interest rates lower with said injections of QE
    5.  thereby eliminating price discovery in bond markets, potentially permanently
    6.  reinflated bubbles in virtually every financial and real asset market
    7.  reduced housing affordability to 13 year lows
    8.  enriched the top 10% of Americans by $17.5 trillion
    9.  subjected the bottom 50% to contracting real discretionary income

    The kicker is that they are still pouring $120 billion into the markets every month, even though they have publicly admitted that inflation has “surprised” to the upside and is not transitory. This is in stark contrast to Powell’s assurances that the Fed would use its “tools” to prevent such an occurrence.

    Now, I don’t for a minute believe the Fed is an evil cabal bent on ruining the middle class and subjecting the poor to unbearable hardship. I believe they entered into the latest round of QE with the intention of staving off an economic collapse and saving financial markets from crashing even further. They successfully accomplished this.

    But, somewhere along the way, probably in June 2020 as SPX fell below its 200-DMA for the second time, the conversation turned to making sure the rally continued. It took almost 10 weeks, but on Nov 4 SPX rose above 3393 for the last time.  It hasn’t looked back, bouncing on its 50-DMA over and over until last month when it finally backtested its 100-DMA – registering a meager 5.9% decline.

    The Fed has demonstrated the astounding power of its tools: ever-increasing oil prices, currency manipulation, interest rate manipulation, and the periodic crushing of vol. But, it has caused, not moderated, higher inflation.

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  • Buying the Dip?

    Futures are up moderately this morning, bouncing 60 points from their midnight lows on a retreat in VIX. Note that it wasn’t a collapse – the usual response when a rally is resuming.

    This lack of algo baiting occurred yesterday, too, when ES completed a Head & Shoulders Pattern and backtested it in a fashion that was reminiscent of the old days, when central bankers didn’t “fix” every little dip.

    This highly unusual restraint suggests this dip shouldn’t be bought, but is the next stage of a scripted correction we warned about several weeks ago [see: Correction Watch.]

    Our downside case remains intact, with an even more bearish Head & Shoulders Pattern up next.

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  • Powell Doesn’t Disappoint

    Futures nailed our 4424 target overnight. Most will attribute it to Powell’s (completely unsurprising) resolve to support the economy the stock market. But, we know that the algos were spurred into action by VIX’s drop back into the falling channel from Mar 2020 and its dip below its 200-DMA.

    Remember, it ain’t over till it’s over. Follow this headfake at your own peril.

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  • Equities Plunge on Loss of Algo Support

    Futures reached our next downside target earlier this morning, the Fibonacci retracement at 4348 we added on Sep 9 [see: Just Don’t Call it a Taper.] ES is now off 4.6% since recent highs and 4% since our Correction Watch on Sep 8.

    The algo factors, which have propped up stocks for months, are positioned for further losses following their realization that a bounce at the 50-DMA is not guaranteed.

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