Futures are up sharply following Friday’s 140-point reversal which finally saw SPX/ES reach the -20% mark. As we discussed last week, the market should surprise many this week.
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Tag: DXY
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Charts I’m Watching: May 23, 2022
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Sure OPEX, But Then What?
Futures are up about 1% this morning – par for the course for an options expiration Friday. The Chinese prime rate cut is no doubt helping.
But, what happens next week as new and pending home sales, durable goods, FOMC minutes, GDP, PCE and Michigan Sentiment come rolling in? This will be a serious test of the market’s ability to hold its lows, let alone continue to bounce.
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Charts I’m Watching: May 18, 2022
We’re seeing more backtesting this morning, consolidation after yesterday’s strong surge.
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Analog in Play
Futures are all over the map this morning, with the overnight losses largely erased at one point.
The key, though, is that SPX bounced back above a key Fib level after tagging its 20% target last week. Although it’s still early stages, our analog is in play.continued for members… (more…)
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The Big Picture: May 12, 2022
SPX closed below important support yesterday, suggesting that the current leg down isn’t yet over. Indeed, things could get worse.
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Bitcoin’s Meltdown
BTC reached our next downside target at 28,600 last night, then dropped as low as 25,401 before bouncing back to current levels.
It’s not unusual for BTC to overshoot important support. And, this .618 Fib level is theoretically important support. But, it’s also important to remember that a bounce is sometimes just a backtest of newly formed resistance before another leg down.We’ve been bearish on BTC since 66,432 in October 2021. We were a little early, but maintained our posture ever since with with the exception of the Dec 2021 and Jan 2022 bounces – a stance which has produced exceptional gains.
We’ll take a fresh look at BTC and whether it’s worth trying to catch this falling knife.
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A Swing and a Miss
ES spent 11 hours hanging around our next downside target yesterday. While the session had many characteristics of capitulation, the fact that SPX didn’t quite reach significant support (3956) suggests that the overnight ramp is a head fake.
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Nobody Saw it Coming
The financial press usually starts to take things seriously about this point in a correction. The permabulls aren’t calling bottoms any more, while the bears are licking their chops. It never fails, someone on TV says something like “no one saw this coming.”
It’s silly, of course. What they mean is that they didn’t see it coming. Plenty of others did. Some, like us, saw it months ago. This was our Jan 3, 2022 ES chart, illustrating the downside case.
We reiterated the target, called the bounce over, and nailed down the timeline in late March.
Now, as we finally approach ES 3997, it seems that more and more mainstream bulls and trend followers are getting bearish (better late than never.)
The risk, of course, is that excessively bearish sentiment would stoke another bounce and postpone the 3997 tag. VIX has some thoughts about that.continued for members… (more…)
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The Reflation Trade
Remember how excited the bulls were about the reflation trade? Higher interest rates meant the economy was reopening at a good clip. What could be better than that?
Things look a little different from the perspective of 3%+, don’t they?
Nothing alarming here…
Remember, it’s not the inversions that bite, but the spikes higher which come after.
Futures are off again this morning following a strong jobs report, but we’ve yet to punch through Monday’s lows.
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A Failure to Communicate
Remember that scene in Cool Hand Luke where Paul Newman mouths off to the Captain after a failed escape attempt? He doesn’t initially appreciate the gravity of his situation. He is soon reminded.
That’s what yesterday’s post-Fed presser felt like. Powell was trying to convey the sense that the Fed means business. It is going to get serious about escaping the inflationary mess it has stepped in.
The market (well, the algos) didn’t hear that. They heard Powell say exactly what they expected and, spurred on by the huge bets lined up on the bearish side of the ledger, decided to mouth off.
Clearly, they don’t appreciate the gravity of the situation, as we were reminded by this morning’s labor productivity report – the worst in 75 years.
We would do well to remember that we’ve had these moments of euphoria before. The carefully curated decline which began in late March…
…has seen more than a few deviations of late.
But, facts are still facts. Inflation – especially very sticky labor costs – is still a problem, and the Fed waited so long that they now have no choice but to tighten into a recession. There was a time when they could have engineered a soft landing. But, that opportunity was, dare we say, transitory.continued for members… (more…)
