Futures have bounced about 1% overnight, retracing a Fibonacci 61.8% of the losses from Thursday’s highs.
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Tag: ES
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A Turning Point
Per our analog, today is the next significant turning point – important in terms of confirming the direction and distance of the market’s next move. It has done an excellent job of forecasting the reversals, rallies and drops since we first posted it on May 13 [see: Analog Watch.]
The first time I came across one of these, it worked out spectacularly. I started noticing in May 2011 that the turning points and rallies/declines which had been occurring at that time very closely matched those of the 2007 top.Just after Day 32 in late June [see: Deja Vu All Over Again] I began laying the entire roadmap which would presumably end with a very sharp drop of around 20% by Day 70. As it turned out, the S&P 500 plunged 19.6% by Day 69. Details are available HERE.
The current analog is different in terms of how quickly things will play out. If it plays out, however, the market is in for much greater losses in the months ahead.continued for members… (more…)
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Productivity: Worst Since 1947
The first quarter decline in non-farm productivity was the largest since 1947. The chart below from briefing.com shows the 7.5% plunge, contrasted with an 11.6% increase in unit labor costs. If the country had locked down during this time, you might be able to make an argument that a recession isn’t necessarily coming.
But, this slowdown came courtesy of a 2.4% output decrease. In other words, it’s another reason to believe a recession is here and a soft landing ain’t in the cards.Futures have been all over the map overnight, but are currently hanging on to the channel bottom from May 20. Note that we finally got that 10/20 cross and are nearing a backtest of the 50-day moving average – just in time to set up a nice trap.
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Charts I’m Watching: Jun 1, 2022
Futures are moderately higher this morning as algos respond enthusiastically to Salesforce’s earnings and ignore the ongoing meltdown in mortgage applications and uptick in COVID cases. Here’s a snapshot of testing results at my daughter’s college, which finally reinstated a mask mandate after the positivity rate reached 10%.
I think they could use a primer on chart reading…continued for members… (more…)
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Inflation Update: PCE
PCE comes out later this morning, providing the most up-to-date picture of the challenge facing the Fed. Judging from yesterday’s 2% pop, investors are hopeful that inflation might be leveling off.
Futures are off very slightly.
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A Crucible Moment
The Information reports that Sequoia Capital has issued a warning to its startup founders, detailing a series of moves that should be taken to avoid a “death spiral.”
“Its latest warning to its portfolio companies takes the form of a 52-slide presentation, a copy of which was viewed by The Information. Sequoia described the current combination of turbulent financial markets, inflation and geopolitical conflict as a “crucible moment” of uncertainty and change. Sequoia told founders not to expect a speedy economic bounceback akin to what followed the start of the pandemic because, it warned, the monetary and fiscal policy tools that propelled that recovery “have been exhausted.””
Sitting here in Silicon Valley today, where one bedroom shacks still fetch $1.5 million despite sliding tech stock prices, it’s not hard to imagine that the worst is yet to come.
Futures are up modestly this morning, with our analog still on track.
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Charts I’m Watching: May 23, 2022
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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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…)
