pebblewriter

Tag: EURUSD

  • 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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  • The Holding Pattern

    Futures are heading for another test of the 2.618 Fib extension at 3076.93, the fourth since last pushing above it on Monday.

    There are numerous targets below, but that would mean cooperation from the algos – a rare commodity these days. The bearish case, however, is growing stronger every day.

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  • Powell: What Did I Say!?

    I saw an interesting interview on CNBC this morning where the guest observed how important overnight trading was to the market’s overall performance. Andrew Ross Sorkin offered data that if one bought the S&P 500 at the close of each day of trading and sold at the next morning’s open, they would be up 650% since 1993.  If, instead, they bought at the open and sold at the close, they would be down 3%.

    This observation won’t surprise any of our members, who are well-versed in the market’s increasingly endemic ramp jobs over the past 12 years. So far so good. The problem with the interview came when a rationale for the effect was offered: one should be compensated for taking overnight risk.  Mike Santoli then chipped in, adding another explanation: more news happens outside of market hours than during.  Ugh. And, it was going so well…

    Let’s be clear about one thing: markets are manipulated, and it’s almost always intentional. Sometimes it’s quite obvious and effective, such as the announcement of a enormous new round of QE on March 23. This particular one was ridiculously obvious, as it came at 8am on the day the Dow would complete a 38% crash to test its Nov 9, 2016 lows (the day after the presidential election.)

    The rest of the time, it’s done so discretely that most observers are unaware of the actual machinations. We discuss the whys and wherefores every single day, as understanding the motives and means provides an excellent road map for our forecasts.

    A great example is our VIX chart, which has exhibited an orderly collapse since it reached our Fibonacci .886 target at 80.3 on March 16.The declines most often come in the after-hours, before the cash market opens. This prompts the algos to buy futures, which results in a gap higher on the open as the rest of the machines kick into gear (index funds, ETFs, quants, etc.) The fundamental crowd, which accounts for only 10% of volume, brings up the rear.

    It’s notable then that after bouncing at its 200-DMA and a trend line off its 2018 lows, VIX finally departed from this channel (the yellow arrow above) last night.

    This allowed our favored scenario to play out as described yesterday.

    I’m leaning toward a correction beginning today, but am unsure whether the channel bottoms at ES 3076 and 3122-3135 will hold or not.  It depends a great deal on what Powell says later today.

    Bottom line, Powell’s comments weren’t terribly uplifting as he essentially confirmed that a rebound is not just around the corner. The problem is the fallout from the coronavirus – which the rest of the world is beginning to understand has not gone away — not even with the Fed’s best efforts.

    As to the markets… so far, so good. The key, of course, will be what happens if/when it reaches the 2.618 Fib extension at 3076.93.

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  • Another Yield Curve Warning for Stocks

    Two steps forward…in order to accommodate a big step back.

    We’ve seen it countless times in the lead-up to Fed meetings, GDP reports and, lately, jobs data. With May unemployment expected to top 20% (it’s unofficially already there) after another 7.5 million joined the jobless ranks……the market’s caretakers put a 58-pt cushion into the market.  ES’ 10-day moving average, for instance, is about 87 points below last night’s highs. Had ES instead fallen 87 points from yesterday’s lows, it would mean a risky test of its 200-DMA.

    It’s gratifying to see scores of analysts come to the realization that the markets are being heavily influenced (a more accurate word is manipulated) by massive Fed stimulus. But, as members know, this has been going on for years – particularly as stocks reach key levels of overhead resistance.

    With the Dow finally joining SPX in reaching its 200-DMA on Wednesday and several key components (e.g. AAPL) taking great pains not to break out to new highs, it seemed as though we might get at least a pause in the meltup, maybe even a correction.

    Our yield curve model confirmed it yesterday with the 2s10s breaking out above all recent highs except that seen in late March.Now, we’ll have to wait and see whether the algos, being directed this morning by USDJPY, VIX and CL, are intent on notching new highs or will, temporarily at least, reconcile with the real world.

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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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  • The Hits Keep Coming

    It’s the last day of a short week packed with more important economic data — which the market has managed to ignore so far. Today might be a little different, as the spike in the savings rate and the collapse in consumption confirm a troubled road ahead for the strong consumer narrative.  Gee, could 25% unemployment actually begin to matter?

    Ignore the spike in personal income, as it reflects the massive government stimulus checks sent out last month.

    The PCE deflator also surprised, plunging almost to 2009 levels. So far, the futures have managed a muted reaction, with a likely falling wedge setting up following yesterday’s reversal at our channel midline target.But, with China trouble, riots in Minneapolis, and Trump taking a swing at social media darlings, maybe the data will matter for a change.

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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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  • Yield Curve Warning

    In a bit of a delayed reaction to Treasury’s announcement of its $3 trillion borrowing needs in Q2, the 2s10s has pushed above the white TL connecting all-time lows – a clear warning, should it last, for equities.

    Meanwhile, CL backtested its Feb 2016 lows and USDJPY broke down at about the same time that ADP announced another 20 million job losses (roughly in line with Friday’s NFP.)  All of this came on the back of dismal earnings from market darling Disney.

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  • One Million Coronavirus Cases, Market Oblivious

    It’s a day we all knew was coming — over 1 million cases of coronavirus cases officially diagnosed in the US, over 3 million worldwide. Experts such as Scott Gottlieb, former head of the FDA, estimate that actual US cases are 10 to 20 times the reported figure. Deaths currently stand at 56,803 – about 30% of all closed cases.

    Social distancing has slowed the rate at which new cases are being diagnosed. But, with many states reopening, a shortage of tests, no contact tracing, and no viable therapeutic or vaccine yet available, the number of cases and deaths seems likely to accelerate.

    The market continues its oblivious ways with last night’s low-volume meltup good for about 1.5% so far as the Fed begins its two-day meeting.continued for members… (more…)