pebblewriter

Tag: FOMC

  • The Big Picture: Mar 25, 2024

    Many bears have simply given up betting on a downside that, despite plentiful recession indicators, feels increasingly unlikely. Since the S&P 500 completed its Inverted Head & Shoulders pattern back in December, the index has piled on nearly 14% [see: A Look Ahead at 2024.] The many, many bulls point to a generally strong economy, healthy employment picture, and the transformative potential of AI to justify the market’s historically high valuations. The bears see things differently.

    For an excellent summation of the bears’ case, take the time to read John Hussman’s Universal Capitulation and No Margin of Safety.  He makes some very compelling points regarding valuations…

    We’ve observed greater extremes only twice in U.S. financial history: the week ended December 31, 2021, and the week ended August 26, 1929.

    Other market gurus have also rung alarm bells, from Bill Gross’ warning of “excessive exuberance” to Chris Senyek’s concerns about the “potential formation of another late-90’s-style TMT [technology, media and telecom market] bubble” to Jeff Gundlach’s admonition that “this feels a lot like 1999…there’s a lot of risk in markets that have run this far.”  Even perennially bullish Warren Buffett is sitting on $168 billion in cash, and recently wrote that “markets now exhibit far more casino-like behavior than they did when I was young.”

    We’ll take a look at some of the most compelling economic data and charts that should provide guidance on the remainder of 2024 and beyond.

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  • Breakdown/Breakout

    In a repeat of the most effective algo move of the past 10+ years, VIX broke down following the Fed’s no-news rate decision and press conference yesterday.

    As always, this allowed equities to leapfrog an area of stubborn overhead resistance. continued for members… (more…)

  • FOMC Day: Mar 20, 2024

    Markets are at all-time highs as we await the FOMC’s latest decision on interest rates.

    Note that we’re going on 21 months of a yield curve inversion, the longest since August 1978 to May 1980. Interestingly, the market was flirting with new, all-time highs back then as well.

    Also interesting, that was one of many inversions that was followed by a recession. In fact, every inversion was followed by a recession.

    Is there any reason to expect that this time will be different?

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  • Hey Fed: You Break It, You Fix It

    In his January press conference, Fed Chief Jay Powell accepted some responsibility for the sharp rise in housing prices during the pandemic.

    “We’re also well aware that when we cut rates at the beginning of the pandemic, for example, the … housing industry was helped more than any other industry.”

    This statement implies that, were it not for the pandemic, the current inflation picture wouldn’t be burdened by sticky, elevated housing prices. But, that’s just not true. The problem developed long before anyone heard of COVID-19. During both the 2000-2003 recession and (especially) the 2007-2009 recession, the Fed slashed interest rates in order to save the housing market from steep price slumps. The Fed’s belief that it could eliminate the natural cycles which have always existed in our economy ultimately led to even worse fluctuations. The current housing crisis was brought on by fifteen years of historically low interest rates – not just the pandemic rescue.

    Now, the Fed says they don’t have the tools to fix the problem they created. That much is probably true. Runaway prices usually require a recession to bring them back to trend. But, the least the Fed could do is own up to the problem that they themselves created.

    Futures are off moderately, testing the 10-DMA as we approach the open. But, of course, VIX hasn’t been hammered back below its 200-DMA yet.

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  • CPI Hotter Than Expected

    February headline CPI came in at 0.4% versus 0.3% expected (and January.) Core CPI registered a 0.4% rise versus .03% forecast and 0.4% prior. YoY, headline was up 3.15%, up from 3.09% in January and a slight beat of the 3.1% expected, while core rose 3.8%, down from 3.9% in January.

    Shelter and gas price increases were responsible for 60% of the rise in February.

    This is in keeping with our Gas v CPI model which shows a slight uptick in MoM pricing in the midst of a YoY decline.

    The short-volatility algos were busy this morning, with VIX diving more than 5% in minutes to back below the 200-DMA.

    Futures, which might have been expected to tumble on the expectation of further delays to FOMC rate cuts, rallied instead. continued for members… (more…)

  • Charts I’m Watching: Mar 8, 2024

    Blink, and you might have missed the selloff this morning when nonfarm payrolls came in much higher than expected but the January print was revised sharply lower.Fortunately, the algos were on it, immediately crashing VIX to a point where a 15-pt decline in ES turned into a 15-pt gain.

    This should put SPX at its 1.272 Fib extension, a potentially important level of overhead resistance ahead of next week’s CPI and PPI prints.

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  • Charts I’m Watching: Feb 28, 2024

    Futures are off moderately in the lead up to tomorrow’s important PCE print.

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  • Charts I’m Watching: Feb 26, 2024

    Futures are flat ahead of the open as traders place their bets on Thursday’s PCE print.

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  • Back on Track

    Stocks rode NVDA’s coattails back into their rising channels yesterday, right back to the top of already overstretched chart patterns.

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  • All Good Things…

    All good things must come to an end, or so the saying goes. For NVDA, it’s clear that the stock’s rally since the end of 2023 was following a very steep and narrow acceleration channel. These sorts of patterns feed upon themselves. As long as no one upsets the apple cart, there are outsized profits to be had. But, when things break, they tend to break in a big way.

    Futures are slipping ahead of the opening, with numerous downside targets coming into view. Of course, the downside case would be damaged considerably if NVDA were to come out with stellar earnings and outlook that boosted ES back into the rising yellow channel. FOMC minutes are also due out.

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