Futures are struggling after an overnight ramp job driven by VIX’s retreat from its 200-day moving average. Aside from the technicals, we see more and more analysts echoing our view that a rate cut makes little sense at this time.
Our charts indicate three distinct and very concerning tripwires for equity investors which, depending on what the FOMC decides, suggest substantial downside.
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PPI came in at 0.0% MoM and 1.8% YoY, supporting expectations of a 25 bps rate cut in November. Algos approved and are holding yesterday’s trading range. These expectations, however, are probably wrong.
As we’ve discussed often over the past few months, the decline in goods prices from 0.6% in Jul to 0.0% in Aug and -0.2% in Sept was driven primarily by energy prices (-2.7% in Sept), a trend which will reverse in October.
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Futures are slightly lower on the last day of a pretty impressive Q3 at +8.7%.
Can the rally keep going in October?
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Futures are up slightly ahead of another data-heavy week: S&P Services and Manufacturing PMIs today, Philly Fed Non-Manufacturing, Richmond Fed, and the Conference Board confidence data tomorrow, and Initial Jobless Claims, Q2 GDP, and Core PCE later this week.
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Futures are flat this morning following unemployment data that supports the widely held expectation of a rate cut when the FOMC meets Sep 17-18.
The algos are presently concerned with the yield curve, which continues to warn of further downside, tomorrow’s jobs report, and a pesky gap which refuses to be ignored.
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Futures are off moderately following yesterday’s reversal, the 6th session in a row that ES failed to surpass its .886 Fib retracement.
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In our last dedicated Update on Gold and Silver in April, we noted that gold had reached our Fibonacci target of 2466.50 but could have further to go.
GC is fairly straightforward. There’s a large IH&S pattern which completed around Mar 7 targeting 2557, a short distance above the white 1.618 at 2466.50.
GC reached 2557 this morning.
It’s interesting that it’s reaching overhead resistance at the same time as SPX and at the same time that DXY has reached our next downside target.
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Futures are up slightly as the FOMC begins its July meeting. But, it’s a continuation of the consolidation that began last week.
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A lot has happened for RUT in the past week. It was only 11 days ago that we updated its chart, suggesting RUT would reach 2282 by the end of the year.
RUT’s reversal at its .618 in April set up either a Gartley or Bat pattern, meaning a move to its .786 at 2282.27 or its .886 at 2364.78. If we extend the dashed red trend line to the right, we get an intersection with the .786 at the end of the year – a very common scenario. While the .786 in December is a logical next target, an equally compelling case can be made for the .886 in September or October.
Don’t look now, but RUT pushed past the red TL we discussed, allowing RUT to tag 2282 (well, 2278) late last week.
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Greetings from Anegada, British Virgin Islands. We continue in vacation mode, with the next post planned for Thursday, May 16.
The markets continue to track our forecast, with breakouts in equities and currencies and a breakdown in VIX. Oil and gas continue to hint at a breakdown, buy this remains a wild card.
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