pebblewriter

Tag: ES

  • PPI Disappoints

    The producer price index missed this morning, coming in at -0.2% versus consensus and prior read of +0.4%. Core also missed at -0.3% versus consensus of +0.1%. Although the market has certainly staged a V-shaped recovery, someone forgot to check with the economy.

    Not to worry, because Gilead was quickly out with a press release reiterating the virtues of Remdesivir. The algos like this kind of stuff, especially when faced with otherwise depressing headlines.

    More importantly, VIX took a well-timed dive to just below its 10-DMA. The algos love this kind of stuff, and suddenly futures are back in the green.

    Don’t get too excited. It won’t last.

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  • Nothing New

    Another VIX-inspired, holiday weekend ramp in the futures in the face of dismal headlines… What a shock. Not.

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  • VIX’s Important Test

    Futures are up sharply on a better than expected jobs report: up 4.8 million, and the unemployment rate dropping to 11.1%. Initial claims came in at 1.43 million, with continuing claims rising slightly to 19.3 million.

    The direction didn’t surprise anyone, but the numbers surprised most. The reopening of most of the country over the past month has produced the desired results. It remains to be seen whether the spike in coronavirus cases in half the country will put a dent in the trend.

    Back on June 12 [see: Is it Safe?], we alerted members to a development in VIX, which had recently broken out of a falling channel from March and was nearing a 10/20 cross.

    It’s tough to see on the chart above, but VIX’s SMA10 was just about to cross above its SMA20 – a bullish sign for VIX and bearish one for stocks. If VIX is hammered today, the bullish cross can be avoided. If stocks’ meltup is to resume, we could still see VIX backtest its broken white channel or the yellow trend line off the 2018 lows which is nearing the SMA200 currently at 24.89.

    As it turned out, that’s exactly what happened. After the jobs numbers this morning, VIX tumbled to tag its SMA200 and the yellow trend line from the 2018 lows. This completes a 42% drop which produced a 200-pt (6.7%) rise in SPX.The big question, of course, is whether this important support will hold.

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  • Another Day, Another Test

    As we slowly make our way toward the end of Q2, we continue to see tests of important support. They are usually followed by sharp bounces despite the growing evidence that a selloff is right around the corner.Will today be the day the market finally takes the plunge?

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  • Oh Yeah, the China Trade Deal…

    When does “it’s over” mean it’s not over?  When the market plunges 65 points, of course.

    The 2% hiccup came when Fox’s Martha MacCallum asked Trump advisor Peter Navarro whether John Bolton’s claims that Trump delayed imposing sanctions on China over its policy of interning Uighur Muslims would jeopardize the China trade deal. Navarro, fresh off accusing China of deliberately seeding the virus in the US by sending “over hundreds of thousands of Chinese citizens here to spread [it] around…” didn’t equivocate.

    “Do you think that the president — he obviously really wanted to hang on to this trade deal as much as possible and he wanted them [China] to make good on the promises because there had been progress made on that trade deal,” MacCallum told Navarro. “But given everything that’s happened … is that over?”

    “It’s over,” Navarro responded.

    ES quickly plunged below its SMA10 and 2.618 Fib, but was promptly rescued by a plunge in VIX and spikes in CL and USDJPY which, not so coincidentally, popped back above its SMA10.

    In all the turmoil over 9.2 million sickened and 475,000 killed by COVID-19, the ongoing social unrest, and an economy which is arguably teetering, it’s sometimes easy to forget the China trade deal and the months during which the market took its cues from the daily press briefings and chopper talk quips about how magnificently negotiations were going.

    With the White House amping up its rhetoric over China’s culpability for the pandemic, I imagine Navarro’s initial assessment was the honest one.

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  • Charts I’m Watching: Jun 22, 2020

    Futures are off slightly this morning as ES has backtested the channel it meant to break out of on OPEX Friday.  Today marks the beginning of the last seven sessions until the end of Q2 – traditionally a period of flat or rising prices.

    Can the seasonal trend offset the growing list of bearish fundamental and technical factors?

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  • Pop and Drop?

    There’s a lot to unpack this morning, as several targets were tagged overnight.   USDJPY finally popped up to tag its 200-DMA……which enabled ES to come within 1.43 of our 3076.93 target – the 2.618 Fib extension of the drop between 2007-2009. I thought this was going to happen over the weekend, but better late then never.

    It’s been a while since we had a nice pop and drop. Stay tuned.

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  • We’re All Canaries

    It’s surreal, watching our “leaders” debate how many deaths are acceptable and whether workers and children should be sent back into harm’s way.  Only a few weeks ago, we all agreed upon the need to flatten the pandemic’s curve so we could prevent a surge from overwhelming our medical system. Now, the debate is about flattening the soaring jobless claims and preventing the country from falling into a depression.

    I wish I knew the answer. I don’t. But, I’m fairly certain that if we emphasize the economy to the exclusion of medical issues, it would all be for nought – especially for the dead.  As the country reopens and COVID-19 cases and deaths resume their rise, we’re all canaries in the coal mine.

    Futures are off sharply this morning and appear likely to reach our next downside target either today or tomorrow.

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  • Inflation Craters

    Headline CPI fell 0.8% MoM – the biggest drop since 2008…

    …thanks primarily to plunging energy prices.

    Core CPI fell 0.4% MoM, the biggest drop since it began being tracked in 1961.

    The details show strong upticks in food and medical care but weakness almost everywhere else.Like almost all economic data lately, the algos have chosen to ignore inflation, as VIX dropped another 7.7% from its overnight highs. For the moment, nothing else seems to matter much.

    VIX has fallen from 47.77 to 26.37, a 45% decline, since ES backtested its 2.24 Fib extension on April 21. SPX has climbed a total of 8% during that time – with the great majority of its gains on overnight ramp jobs driven by plunges in VIX.

    Today, the algos are also watching the bond market quite closely, as the Fed is slated to dip its toe into corporate bonds – including junk bonds – for the first time.What could go wrong?

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  • The New Normal?

    With May contracts in the rear view, we wondered whether oil markets would revert to some sense of normalcy.  A steep contango continues, however, with June contracts assuming the role of the panic stricken expiration month.

    Futures tested our initial downside target yesterday, the Fib 2.24 extension at 2728.79, and bounced overnight… …as oil and gas prices bounced sharply off our downside targets……and VIX collapsed after tagging our backtest target.The question, as is often the case, is whether the relief rally can continue once equities’ cash market reopens.  And, will SPX ever get to test its own critical support?

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