This morning is essentially the mirror image of yesterday, with futures up modestly on the usual algo drivers: VIX, USDJPY and CL.
This is the 8th session in a row of treading water, making it the longest “stall” of the year so far.
continued for members… (more…)
Futures are off modestly in light trading…
… in the lead up to Wednesday’s important economic data dump. From Briefing.com:
In what is starting out as a quiet week, everything is doing as expected.
continued for members… (more…)
Japan’s inflation hit a 40-year high in October, driven by a policy of placing stock market gains above all else.
When Japan first adopted negative interest rates, the argument was that it would help end the country’s deflationary spiral and return inflation to a 2% goal. Now that inflation is nearly twice as high as the goal, one might expect rates to move at least a little higher.
Although the BoJ has allowed the 10Y to rise to 0.24%…
…they have held short-term rates at -0.1% since 2016.
The BoJ’s utter lack of candor is nothing new. Forget about FTX. Japan’s markets are the biggest Ponzi scheme on Earth. Since the Fukushima disaster in 2011, Japan’s stock market has been driven principally by the yen carry trade which relies on an ever-cheaper yen to attract capital into the stock market.
The obvious limit to this scheme is that as the yen depreciates, imports become more expensive. And, since Japan imports all of its oil and most of its food, it was simply a matter of time before inflation bit Japan in the お尻.
Luckily for Japan, they have no bond market per se. The entirety of Japan’s borrowings are purchased by the BoJ. This monetization of debt has gone on for years without repercussions – until now.
The Nikkei was locked in a falling price channel between Feb 2021 and Mar 2022, when the decline finally reached -20.7%. At that point, it was less than 1% away from its pre-pandemic highs of 24,140.
It was no coincidence, then, that USDJPY picked that specific moment to break above both the midline of a channel and a trend line at least 50 years old.
Subsequent rises in the USDJPY (declines in the yen) have acted to lift NKD above its SMA200 and out of its falling channel. Everything’s going great – unless you consider rising taxes and plunging consumer confidence problematic.
Come to think of it, the US faces similar problems.
* * *
In other news, VIX has sent the all-clear to algos to rally at least a little further – this being OPEX and all.
continued for members… (more…)
Economic data came in as expected except for Philly Fed – a huge miss at -19.4 versus -5.0 consensus and -8.7 prior. But, it was the former dove turned chief hawk Jim Bullard who decided enough is enough, suggesting rates could reach as high as 7% before inflation is tamed. Futures were not amused.
It’s almost inconceivable that ES/SPX won’t tag their SMA200 or channel tops this time. But, even though OPEX is tomorrow, it’s looking that way at the moment.
continued for members… (more…)
October PPI came in at 8% annually and 0.2% monthly versus expectations of 8.3% and 0.4%. Core PPI remained unchanged at 6.7%.
Futures popped up to our 4050 IH&S target on the news, but had already ramped over 40 points prior to the print.
continued for members… (more…)
Seemingly on a rail, VIX’s bump took it only to the top of the falling red channel in place for over a month.
A failure to break out means ES can top its 361.8 Fib extension and reach its IH&S targets. 
continued for members… (more…)
It was more of a red ripple than a red wave. So far, it appears that Republicans will hold a five seat majority in the House and might actually lose ground in the Senate. Futures are moderately lower.
continued for members… (more…)
With the election today and CPI coming out Thursday, things are bound to start getting a little more volatile again.
VIX can’t stay in this channel forever…
Don’t forget to vote!
continued for members… (more…)
More of the same…perhaps until CPI comes out on Thursday.
continued for members… (more…)
The market is essentially unchanged from yesterday, with VIX in a position to make or break this rally unless the FOMC delivers a significant surprise.
We’ve seen this movie before: a sharp rally into a Fed meeting or CPI report that wipes out the put buyers and positions the market for a drop from a higher price level once the disappointing news is delivered.
There is widespread expectation of a 75 bps hike, but less agreement about whether the FOMC will be as dovish as the market’s latest rally would suggest.
continued for members… (more…)
