pebblewriter

Tag: DXY

  • Update on Gold and Silver: Mar 25, 2021

    We have multiple targets being reached this morning, and several more in the works. We’ll start with ES, which just tagged our SMA50 target in a backtest of the falling white channel from which it broke out two weeks ago.

    The one we’ve been waiting on for what feels like forever, though, is silver. SI broke out of the falling white channel twice before it managed to tag our 30.35 target in January. But, as we discussed at the time [see: Hi Ho Silver]:

    With the SMA200 crawling along toward current prices, we can’t discount the potential for a long overdue backtest.

    We’re finally getting that backtest. But, given DXY’s breakout, we have to wonder whether SI’s backtest will hold. We’ll update the prognosis for silver and gold and also sneak in a discussion of EURUSD, which officially reached our next downside target yesterday.

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  • Don’t Fight the BoJ

    I know what you’re thinking: it’s “don’t fight the Fed.” While that’s generally true, too, the Bank of Japan is the central bank which most conspicuously wears its balance sheet on its sleeve. When my charts are a farrago of bearish indicators, but the Nikkei pushes up through resistance? I’ve learned to ignore the indicators and become bullish.

    Conversely, when the narrative is incredibly bullish but the NKD slips below important support, it’s time to short. For those who haven’t been paying attention, that’s where we are right now. We’ve had a few hints over the past week or so, but the NKD suggests there’s more to come. US stocks just haven’t gotten the message yet.

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  • Update on Currencies: Mar 2, 2021

    Algos took their Sunday night ramp and ran with it yesterday. Unlike last week’s breakout, ES was careful this time to break out of and backtest the falling red channel – thanks largely to a 26% plunge in VIX.While all the attention is on stocks, we should note that currencies continue to play an important role in supporting them. Notably, USDJPY reached our next upside target and EURUSD is nearing our next downside target.Today, we’ll take a look at next steps.

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  • The Bond Market Finally Woke Up

    For months we’ve been warning about the coming inflation problem, wondering when the bond market would notice and/or care.  The immediate problem in a nutshell:

    One of the most highly correlated components of CPI with the headline rate is the price of energy, and gasoline in particular.  If prices were to remain where they are now, the base effect will result in a 40% increase YoY in April.  Historically, this has produced headline CPI in excess of 2.5%.The Fed points out this base effect bump will be transitory and should be ignored, but the recent rise in interest rates tells us that the bond market is not ignoring it. In fact, recent beats in economic data and sharp price increases across the commodity complex underscore the notion that the rise in inflation will not be transitory. The pop we could see in April would be only the beginning.

    As we approach $30 trillion in debt with more stimulus on the way, markets have to wonder what to make of CPI of 2.5-3.0% or higher. In our opinion, the US has no choice but to follow in the BoJ’s and ECB’s footsteps and repudiate higher rates until the end of time.

    10Y note futures reached a level at which we have felt would represent critical support. A drop below this level, we reasoned, would sound loud alarm bells. As we wrote yesterday: “This is quite possibly the Fed’s last chance to avoid a real mess in the bond market.”

    Bottom line, don’t be fooled by the Fed’s ability to repeatedly bail out equities at the last minute.

    The algos have learned well to respond to moves in VIX, currencies and oil/gas when they are so instructed. It’s no surprise that yesterday’s plunge was arrested at our previous SMA downside target.

    The problem is bigger and more difficult to cope with than most – including, apparently, the Fed – can imagine.

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  • Inflation: A Growing Chorus

    After feeling like the lone inflation alarmist for the past few months, I find myself in the midst of a growing chorus which now recognizes the Fed’s conundrum. Building inflationary pressures are now obvious to all.

    What isn’t clear is whether the Fed’s nonchalance re rising rates is real or feigned. And, if feigned, at what point will they throw in the towel on the sales pitch that rising rates are great?

    Futures are back below yesterday’s lows and small H&S patterns have formed on both ES and VIX.

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  • Update on Energy Markets: Feb 16, 2021

    Texas, the energy capital of the US, is running short of energy. The cold snap is breaking records throughout the state, with temperatures so low that many wind and water turbines are frozen and not able to produce energy. Refineries are shut down. As of last night, over 3.5 million Texans are without power.

    Not surprisingly, oil, gasoline and especially natural gas prices have shot higher.

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  • 500 Miles High

    Thinking of the late great Chick Corea this morning as I survey the sky-high equities market…  Futures have regained about half their overnight losses, spurred by a timely dip in VIX and pop in 10Y yields (testing Monday’s highs.)

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  • Powell: Let’s Get This Party Started

    Jerome Powell gave a good news/bad news speech to the Economic Club of New York. He noted that employment is still 10 million below February 2020 levels and that a broader range of unemployment would put the current rate at 10%, adding, “We are still very far from a strong labor market whose benefits are broadly shared.”

    As the algos were spinning up their sell orders, he delivered the good news upon which the market relies: “Achieving and sustaining maximum employment will require more than supportive monetary policy.” He added that it could take “many years” to overcome the effects of long-term unemployment and scoffed at the idea of problematic inflation.

    From my vantage point, he’s right and he’s wrong. The strong earnings and cheerleading from pandemic lockdown beneficiaries have drowned out the wails from the pandemic’s have-nots: those who find that even a $1,400 stimulus check won’t pay the rent, the millions of small businesses and self-employed who couldn’t qualify for PPP loans, the millions for whom unemployment  benefits are unobtainable or inadequate.

    But, make no mistake about inflation. Yesterday’s CPI data reiterates our long-held conviction that, although official core inflation is mild, actual inflation is much higher.  Even the understated official CPI will soon soar to levels not seen since before the pandemic (when 10Y yields topped 2%) unless the manufactured rebound in oil and gas prices unwinds posthaste.

    The morning after, futures have regained most of their losses and are again knocking on the door of the 1.272 Fibonacci extension……thanks primarily to yet another VIX “breakdown” from its rising channel which, as we discussed yesterday, has produced another bearish (bullish for stocks) 10/20 SMA cross.Will it be enough to offset the cold water with which Powell just drenched the reinflation trade?

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  • Charts I’m Watching: Feb 9, 2021

    Futures are off modestly as the algos have backed off their assorted breakouts and breakdowns now that the bearish H&S Pattern has been busted.continued for members… (more…)

  • Mission Accomplished

    In another obvious show of how easily this market can be manipulated, ES’ final bearish Head & Shoulders Pattern was busted in the final five minutes of trading yesterday. This morning, SPX’s H&S Pattern will also be busted with a burst higher in the wake of another disappointing jobs report.

    And all it took was for the “Bad News is Good News” algo to pin futures to their ramp job highs until 9:31. The BN=GN algo, of course, has nothing to do with additional stimulus.

    We already know $1.9 trillion is on the way to some who desperately need it and countless more who don’t. It also has nothing to do with additional QE. That’s an ongoing $120 billion per month, rain or shine.

    No, it is about the usual tricks employed by central banks and their proxies: shorting VIX… …shorting bond futures……ramping WTI futures……and shorting the yen. They have all been employed over the past week just to make sure that any lingering bearish patterns were undeniably busted. Just another day in the “markets.”

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