pebblewriter

Tag: fibonacci

  • Powell Back in the Spotlight

    It’s been lonely maintaining that rates would continue to rise over the past 10 months. As we noted in Decision Time:

    “TNX…looks likely to test 47.55 after it digests recent gains.”

    After the 10Y topped its Oct 21 highs, folks started coming around. Now it’s looking fairly obvious.The only question is whether Powell will fess up to the coming rise in CPI and, therefore interest rates, in his speech at Jackson Hole (1005 ET.)

    As we discussed a few days ago [see: Interesting Goings On in Currencies] the cross currents in rates and currencies are problematic for the market. We saw ample evidence yesterday when futures gave up a strong opening  – breaking out of a well-formed channel only to close deep in the red.

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  • Update on COMP: Aug 25, 2023

    In our last major analysis of COMP [see: Oct 13, 2022 Update] we noted that COMP hadd reversed within 1% of our upside target in 2021 and had subsequently dropped to within 0.3% of our 10,122 target.

    Since then, it’s been a battle. COMP finally rebounded to our 13,873 target at the yellow .618 Fibonacci retracement…only to reverse at the .707 Fib at 14,418. Since then, it has been on a wild ride, giving up 2.7% yesterday after failing to break back above its 50-day moving average.

    Its rebound at its Aug 2022 highs was so convincing, we had our doubts as to our 12,828 downside target. It’s now looking like a distinct possibility again.

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  • Charts I’m Watching Aug 14, 2023

    Futures are loitering around the 50-day SMA, leaving SPX’s tag still up in the air.

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  • Amazon: Can it Keep Delivering?

    AMZN stock cares about its 200-day moving average. In fact, it cares a lot. When it pushed above its 2903 Fibonacci target in late 2020, it spent 8 months waiting for the SMA200 (the thick red line below) to arrive and another 11 months defending it. When it finally broke down in January 2022, it began a plunge that ultimately exceeded 50%.  Since January 2023, it has recovered nicely, clawing back above the SMA200 to the midline of the channel that dates back to the year 2000.But, this leaves it at its 200-week moving average and overbought amidst negative divergence while long overdue for a backtest of its 200-day moving average. A backtest from current prices would amount to about 20% – though the SMA200 is on the rise.

    It should be noted that AMZN has been more volatile than the overall market. But, it’s not hard to imagine a sharp decline in the third largest component of the S&P500 leaving a mark on stocks in general.

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  • Update on Currencies: Jul 18, 2023

    EURUSD tagged our 1.1273 target overnight. It came a little earlier than expected, but it’s a significant development given the pair’s correlation with stocks.continued for members… (more…)

  • Minute by Minute

    The Fed will release its June minutes this afternoon, potentially shedding some light on why they paused their rate hikes. But, thanks to plenty of Fedspeak – including Jay Powell’s testimony – we already know that they are as confused and conflicted as everyone else. As always, they are more concerned about markets than anything else.

    Futures are off about 0.50% as we approach the open.

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  • End of the Line?

    The market has frustrated both bulls and bears lately, vacillating between sharp downturns and even sharper recoveries. But, a close examination of the charts shows two very obvious patterns that suggest the tide is about to turn – not in a good way.

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  • FOMC Day: May 3, 2023

    Futures are essentially flat ahead of today’s pivotal FOMC decision and press conference.  This follows a day that saw stock prices plunge below our initial backtest target……as VIX actually broke out – at least for a few hours. The banking crisis obviously hasn’t gone away. How many more First Republics or Silicon Valley banks are out there – clicks away from a bank run? Even those banks which aren’t already in trouble will most certainly cut back on lending, which will certainly raise the odds of a (worse) recession.

    Will the FOMC take that into account as they contemplate future actions?

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  • Core Tops Headline CPI

    For the first time in over two years, core CPI topped headline.  Core, which ignores food and gas prices, climbed 0.4% MoM and 5.6% YoY, while headline came in at 0.1% MoM and 5.0% YoY.

    Not surprisingly, futures jumped at the news that headline CPI had dropped. But, our charts still show an important risk just ahead.

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  • FOMC Day: Mar 22, 2023

    The situation is pretty clear. By raising rates, the FOMC could continue to fight inflation but would also exacerbate the banking crisis. By pausing, the FOMC could give banks a little relief but would loosen financial conditions – thereby making it tougher to reduce inflation to target.

    The seldom discussed situation is what impact the Fed’s decision would have on equity markets. This unspoken third mandate often weighs more heavily on decisions than do full employment and price stability.

    From that standpoint, we look for the Fed to either: (a) pause but stress that the pause is due to rapidly tightening financial conditions which are inherently disinflationary; or, (b) raise 25 bps but stress that this could be the last hike for a while because they believe inflation is headed significantly lower due to tightening financial conditions.

    Our own research indicates that this is true. Gas prices, which are very highly correlated with CPI, are slated to fall 18.6% YoY in March.  The last time the YoY delta hit this level was in Nov 2021 when CPI registered 1.17%.

    Obviously, other stickier factors have usurped the inflation narrative: wages, real estate, cars, etc. But, as we’ve discussed often in these pages, many of these other categories have been fairly flat or have declined over the past year – meaning that their YoY deltas are also falling rapidly.

    Consider food prices, still elevated at 9.5% YoY in Feb.

    Underlying prices, as reflected in the DBA agricultural ETF, have fallen 11.3% over the past year. As long as it remains in the very tight trading range it’s been in since Jun 2022, the YoY decline will reduce inflationary pressures just as oil/gas have.

    Futures have been vacillating around unch all night. The real action should start at 2PM with the announcement, followed by Powell’s press conference at 2:30.

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