pebblewriter

Tag: fibonacci

  • Crossing the Rubicon?

    ES has reached the top of the falling white channel we added a couple of months ago.  At 76 points below all-time highs, a 2.2% move higher would make quite a statement about the integrity of the S&P 500 – essentially that a connection between equity prices and macroeconomic conditions is no longer a reality, nor even a consideration in investing. Imagine future FOMC press conferences and the derision that pretenses to the contrary would invite.

    Is the Fed ready to cross the Rubicon? Or, could this finally be the end of the road?

    continued for members… (more…)

  • Not a Breakout

    Yes, it was impressive. AAPL, FB, GOOGL and AMZN delivered big time. Yet, AMZN, the one that was best positioned to clean up, hasn’t yet broken above a key Fib level, let alone the top of the 20-year old channel which marked the July 13 reversal.

    If it does, fine, bears should prepare for a long, long winter. But, until it does, this remains a dangerous moment for the recovery’s poster child.

    While we’re at it, did anyone notice that after tagging yesterday’s downside target, futures bounced only to the .886 Fib?  Or, that SPX is poised to pop and drop at its own .886 Fib?

    Again, not a breakout.

    continued for members… (more…)

  • Currencies: A Turning Point

    Lots going on this morning, with currencies joining VIX in leading the equity circus. EURUSD smashed its March highs and is closing in on one of two levels of overhead resistance as DXY tests an important channel bottom. The next moves for each will have important implications for the economy and for algo-driven equities.

    ES has recovered 23 points of its overnight losses after failing to hold our .886 Fib target.  It’s one vaccine headline away from recovering 3258.

    continued for members… (more…)

  • Nothing New

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

    continued for members… (more…)

  • Charts I’m Watching: Jun 29, 2020

    Futures are up modestly this morning as we glide into the quarter end on a holiday-shortened, low-volume week.  VIX’s triangle perfectly illustrates the technical picture: attempts to break out have been beaten back, while threats to break down have routinely been rebuffed.

    It’s exactly what one would expect when the goal is to maintain positive numbers for the quarter – in the midst of a horrid fundamental backdrop. It’s hard not to look ahead to July, when the calendar offers less support.

    continued for members… (more…)

  • 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.

    continued for members… (more…)

  • 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.

    continued for members… (more…)

  • 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.

    continued for members… (more…)

  • 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.

    continued for members… (more…)

  • 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?

    continued for members… (more…)