pebblewriter

Tag: economics

  • FOMC Day: Dec 14, 2022

    They’re all important, but this one carries extra significance due to the potential for a slowdown in rate hikes, or at least the commentary regarding one.

    Futures almost backtested the 200-day moving average overnight, but are now essentially flat.

    After all the excitement yesterday, our targets remain the same across the board. If anything, the hoopla complicated the Fed’s task by aptly demonstrating the persistent froth in the markets.

    I believe this practically guarantees that Powell will pull another Jackson Hole and scold investors for their irrational exuberance. Whether it will be enough to counteract the OPEX effect is anyone’s guess.

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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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  • Japan’s Runaway Inflation

    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.

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    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…)

  • All Eyes on OPEC+

    If the enemy of my enemy is my friend, is the friend of my enemy my enemy? The relationship between the US and the Saudis has been through plenty of ups and downs, but it’s been years since it was as fraught as it is now.

    The West is trying to put the screws to Russia, which in turn is trying to put the screws to the eurozone by enlisting the help of the Saudis, who are arguably US allies… Around and around it goes, with a decision due out later today that might spell a 2MM bpd (about 2%) cut in production.

    Will it be enough to revive the correlation between oil/gas prices and interest rates? ES is positioned to at least backtest its SMA10.Stay tuned.

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  • VIX at a Crossroads

    For months, VIX has facilitated higher equity prices – plumbing new lows, breaking down, refusing to rise in cases of obvious market distress. Today, it reached a trend line off the previous highs, all of which corresponded with sizeable bounces in the equity markets. It’s an extremely important test for bulls.

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  • The ECB Chooses Stagflation

    Futures are off moderately in the wake of the ECB’s decision to impose a 75 bps rate hike – its highest ever – on an economy already reeling from spiraling inflation and weakening economic activity.

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  • Charts I’m Watching: Aug 22, 2022

    Futures are off sharply this morning, reflecting the lack of support behind the runup to the last two options expirations.

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  • Empire Fed: 2nd Biggest Plunge Ever

    On the heels of a slowdown in China which was serious enough to cut interest rates, the Empire Fed numbers which came out this morning represent the second largest decline ever.  It was expected to slip from 11.1 to 5.0. Instead, it plunged to -31.3, among the worst readings on record. Aside from the COVID crash, only Nov-Dec 2008 were worse.

    Then, there’s Henry Kissinger – who knows a thing or two about global relations – who says we’re edging toward war with China and Russia.

    Given all that, futures are off only slightly more than 1/2%.  After all, Friday is OPEX.

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  • Charts I’m Watching: Aug 1, 2022

    Futures are off moderately following an algo-driven meltup in July that shook the bears and reset sentiment.

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  • Fast and Furious

    Between an FOMC meeting, consumer confidence, GDP, durable goods, PCE, consumer sentiment, new home sales and a slew of important earnings calls, this week promises to be one of the most important so far in 2022.

    Somewhere in all that data we should learn whether the economy is really in a recession (spoiler alert: it is.) The market’s response could be both fast and furious.

    Futures are up modestly but fading as we approach the open.continued for members… (more…)