pebblewriter

Tag: forecast

  • This is a Test

    Yesterday, we got a taste of what happens to United Airlines passengers who are “disruptive and belligerent.”   In what is being described as one of the biggest PR fails in recent memory, United CEO Oscar Munoz defended the action taken to forcefully drag an Asian-American doctor from a flight that United had overbooked.

    No doubt United would have found the volunteers it needed had it upped the compensation it was offering to $1,000, $1,500 or even $2,000.  Instead, it will pay millions to the passenger, and many more millions in lost revenues from prospective passengers who are too horrified to “fly the friendly skies.”

    The stock is likely headed for at least 61.72, a 14% drop from yesterday’s highs — about $3 billion off its market cap.  And, that would be a positive outcome — if it’s able to hold both horizontal support and its SMA200.

    While the event itself was shocking, it’s equally surprising that the CEO of a major airline could be so tone deaf as to email his employees that “I want to commend you for continuing to go above and beyond to ensure we fly right.”

    The most interesting CEO on the world stage, right now, is our own Donald Trump.  He faces much greater challenges than Munoz did: escalating military conflicts with both Syria and North Korea and, by proxy, Russia and China.

    We’ve had a taste of Trump’s leadership skills with respect to the battles over health care, tax reform, and scores of executive orders relating to the environment, energy, etc.  He won some, and he lost some. None of those, however, involved the risk of nuclear war.

    Is it any wonder that investors are a little nervous and stocks have, so far, not shaken off this particular geopolitical risk?

    On Feb 10, SPX broke out of a large, year-old channel that was averaging 17% YoY returns.  It has backtested that channel top seven times in the past several weeks — including a serious plunge below it on Mar 27.

    Today, it’s happening again.  Will it survive this test?  It might just depend on whether or not Trump survives his.

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  • Fed Minutes: How Hawkish Are They?

    Markets tend to moves higher on Fed minutes days, even if the news isn’t all that positive.  It’s all about convincing investors that the FOMC has their best interests at heart — that all they’re worried about is making sure that stocks continue to rally.

    Today’s session is slightly complicated, then, by ADP employment which came in much higher than expected: 263K versus 175K.  Theoretically, this puts pressure on the FOMC to raise rates and/or trim their balance sheet faster than anticipated.  But, central banks have many tools at their disposal to ensure that the complication doesn’t become a problem.

    S&P 500 futures are up 6.5 points, but right to Fib resistance.  

    Can the Fed spin a hawkish set of minutes into something positive for stocks?

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  • Gold: Following the Yellow Brick Road

    I’m not a gold bug.  I’ve always thought the price is pretty heavily manipulated (long before it hit the headlines) and I guess I’ve avoided it on principle.  Looking back at my forecasts over the past year or so, that was probably a mistake.

    Since our December 14, 2015 forecast, GC has gained about 19% — not shabby.  However, if one heeded the forecasts offered with each subsequent update, the net return would have been over 80%.

    I’ve said many times, lately, that forecasting stocks has become a lot tougher than forecasting the various drivers of stock prices.  In the case of gold, it is obviously affected by the value of the US dollar, which is an important component of USDJPY — a key driver of equity algos.

    Thus, GC — like USDJPY, WTI and VIX — is one of those things that’s been relatively easy to forecast even though I’ve devoted only the occasional hour or two to its study.  Before we touch on today’s forecast, let’s take a look at the past year’s periodic forecasts.The numbers in the above chart correspond to the posts below.

    1. Dec 14, 2015 (GC: 1060):
      “If DX plunges further, as I expect it will, GC’s 4th bounce could be a doozy: 1150-1180 for starters, and 1286 after that.”  GC reached 1180 by Feb 8, topped out at 1287.80 on Mar 11.
    2. Mar 4, 2016 (GC: 1280):
      “I’d be very cautious in chasing GC at this point…acts like it’s reversing between here and 1286…take the gains…it could easily backtest the .618 at 1207.60.”  GC reached 1286 the next week, then reversed to backtest 1206.
    3. April 8, 2016 (GC: 1240):
      “If [gold] breaks above the purple midline [at 1270] then 1379-1380 is the next logical target…”   Gold reached 1377.50 three months later.
    4. July 7, 2016 (GC: 1361):
      “Our target range from April 8 was 1379-1380.  Yesterday’s 1377.50 was probably close enough.  If it can’t make new highs today, the next stop is the neckline at 1307..”  GC, which peaked at 1377.50 on Jul 6, dropped 5% to 1310 over the next 2 weeks.
    5. Aug 26, 2016 (GC: 1324):
      “…[there’s a] huge IH&S Pattern, the neckline of which is the former high at 1307ish.  If TPTB are serious about discrediting GC anytime soon it’ll involve getting it back below that [1307] support.”  GC tumbled to 1307, testing it three times before breaking down to 1243 on Oct 7.
    6. Oct 7, 2016 (GC: 1254): “…GC tagged its SMA200 and the bottom of a pretty good looking channel earlier — usually good for a bounce.”  GC bottomed the next day at 1243, bounced for a month, reached 1339 on Nov 9.
    7. Nov 14, 2016 (GC: 1227): …GC’s channel finally broke down two days ago and has potential to 1083 — a 12% drop from here.  What better way to finish the year out?  GC plunged 103 (8.4%) over the next month.
    8. Dec 5, 2016 (GC: 1175): If the .618 [1172.40] breaks down, then the next support isn’t until the red TL at 1130, followed by the .886 at 1083.50… GC reached 1130 on Dec 15.
    9. Dec 15, 2016 (GC: 1129): “GC is currently testing an important internal TL of support… a potentially important test…that could produce a bounce to the purple midline [at 1230] or the SMA200 — currently at 1278.”  GC reached the SMA200 at 1264.60 on Feb 27.

    After tagging its 200-day average in February, gold tumbled about 67, back below a key channel midline.  But, it is right back in the swing of things, having nearly reached the SMA200 a second time just yesterday.

    With all the discussion about what the Fed will or won’t do for the rest of the year, what’s next?

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  • Betwixt and Between

    SPX and ES managed to hold key trend lines and channels yesterday, bouncing from just short of our downside targets to exactly where we expected.  All it took was an 18.3% hammering of VIX — no problem for the Masters of the Universe (real subtle, guys!)

    But, there was no breakout.  There wasn’t even an overnight ramp job.

    This somewhat validates our theory about the oil and USDJPY two-step, meaning we should be looking for a big, sudden move in the currency markets as soon as today.

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  • Reproach and Retreat

    The first big Republican victory — the repeal and replace of the ACA — has morphed into reproach and retreat.  The net impact: what does this failure portend for the rest of the Trump agenda and, thus, the Trump Rally?

    Regular readers know that I’ve looked askance at this rally from the start [see: Why the “Trump Rally” is a Fraud.]  It was born of a sharp reversal in CL, USDJPY and VIX — the key algo drivers.  Momentum traders jumped on board as it rose.  And, somewhere along the way, mainstream investors convinced themselves that the new and improved outlook justified an 18% rally.

    But, live by the algo, die by the algo.  The yen had to appreciate to compensate for higher oil prices.  Higher US and euroland inflation necessitated a drop in oil and gas.  And, front-running the Fed’s tepid response to spiking inflation was widespread.  With the Trump Rally narrative in doubt, there were simply too many plates to keep spinning.

    Futures are off 22.50 at the moment, leaving us some clues as to what to expect for SPX.  But, the more important side of the equation is where do WTI and the USDJPY dip to?

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  • Horseshoes and Hand Grenades

    There’s an old expression that says “close only counts in horseshoes and hand grenades.”  So, we spent most of the day yesterday wondering whether the day’s 2336.45 lows were close enough to our long-held downside target of 2335.34.The tag was marred by premature reversals in oil and VIX.  Did the guys working the algos not get the message?  Or, were they just a little over-eager?  Admittedly, it’s tough to nail a precise value in an index as unwieldy as the S&P 500.  But, they went to all the trouble of engineering a backtest of a key Fib level.  You’d think they’d care…

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  • Next Steps

    We’ve been watching a triangle form for over a month, wondering whether/when it would break out or break down. Yesterday, we got our answer.

    After coming within .40 of our 2170-2173 target on Monday, the triangle broke down — despite vigorous intraday ramping in USDJPY and CL.  Tuesday’s initial downside target at 2150 was taken out without any difficulty.

    New market-health-indicator Deutsche Bank, which reached our 13.98 target (+18.7%) from our bottom call on Sep 27, is wavering.  Having briefly pushed through resistance, it’s now clinging to support.2016-10-12-db-60-0600What’s next for stocks?

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  • The Only Charts That Matter

    Note: Final 24 hours for our celebratory Membership Special.  Annual memberships, normally $1,750, are being offered for only $640.42, less than $2/day for daily forecasts and live, intraday market commentary geared to helping you avoid and even profit from the volatility we’re seeing.  For more details and to sign up, CLICK HERE. 

    *  *  *  *  *

    I sat down to update the CL and GC charts tonight, but quickly realized there’s no point until the following pattern is resolved.  How about it, central bankers?  Are you ready to let the markets run where they will?

    Because, ES’ Head & Shoulders Pattern below targets 1530 — another 17% lower.  For anyone keeping track, that’s a 28% drop from last May’s highs.  Today’s key level, 1837ish.  A close below here would be quite bearish.

    2016-01-19 ES wkly HSBTW, the only reason the above chart is where it is…?  This chart: the USDJPY — which has gone nowhere for the past 14 months.  It’s also perched on a precipice.

    2016-01-19 USDJPY daily HSPut them together, and the relationship is unmistakable.  Every time USDJPY dips to the bottom of the red channel (at the yellow arrows), ES takes a dive.  In fact, the dives have been deeper with each successive dip.

    2016-01-19 USDJPY v ESSPX completed its own H&S Pattern last week [see: Are You Happy?], but hasn’t been able to rebound because it was waiting on ES to arrive at its own line in the sand.

    So, come on, central bankers.  We’re curious.  Have you more tricks up your sleeves; or, are you finally ready to take the quotation marks off the “markets?”

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  • Charts I’m Watching: Aug 12, 2013

    The eminis are flirting with danger this morning, having ducked below a key channel midline (dashed, purple) but bouncing off a smaller channel bottom and another channel midline (dashed, white) near a .786 (1674.15) for a Gartley Pattern completion.

    The dollar is threatening to break out of the falling wedge….

    And, the SPX is set to tag the neckline of the yellow H&S Pattern again.  Holding above 1686 will be key.

    I’ll play the downside on the opening with an eye towards the red .886 at 1679.86 — our target from last week.

    UPDATE:  9:35 AM

    We got a bounce at the pale blue channel midline, but I suspect it’s just to back test the neckline and that 1680 is still on the table.

    The danger for bears is a dip to tag the .886 and complete the H&S Patterns, then a rebound back above the neckline to invalidate the patterns.

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  • Charts I’m Watching: May 10, 2013

    The market bounced back a little into the close yesterday, and recovered further overnight.  ES retraced a Fibonacci .886 of the initial plunge, and is hanging in the small channel established over the past week.

    We shorted SPX at 1635 yesterday, but weren’t sure whether or not the upside was completely done. This morning, there’s still some question.

    The dollar, which we remarked yesterday morning looked “ready to rumble” did just that — completing its largest move in the last 16 months.  It retreated just a bit off the .786 before zooming up to tag our .886 target at the purple channel midline.  How it handles this price level will determine whether or not we see any follow-through on equities this morning.

    We would normally see a pull back at the .886 — a Bat Pattern.  But, Bats can and do go on to become Crab Patterns — which would mean a move up through the channel midline to the 1.618 extension at 84.522.

    Daily RSI arrived at a 4-way “stop sign” overnight — three channel midlines and a channel top.  Though it might ultimately push through, this supports the idea of at least a pause and more likely a pull back, meaning stocks should rebound from here.

    The question, of course, is “how much?”  The EURUSD, which we remarked yesterday was “hanging by its fingernails,” wasn’t able to hold the purple channel.  It completed the small scale Bat Pattern we were expecting overnight (purple), and has potential to the red .886/purple 1.618 down around 1.28.

    The daily RSI supports this move, as it fell right through its nearest support overnight.

    All eyes are on Bernanke this morning, as he speaks at the Chicago Fed.  Evans and Plosser’s semi-public debate regarding QE has ratcheted up a notch the past couple of days. It’ll be interesting to see whether Bernanke can reassure the markets that economic conditions remain “just right” for continuing to pump $85 billion monthly into the markets: getting better every day, but not able yet to stand on its own two feet.

    The other big story, of course, is the yen. We discussed yesterday how it was a moment of truth for the USDJPY.  It was threatening an Inverted H&S Pattern, but had run into an important channel line.

    The pair sliced through it like it wasn’t there, completing the IH&S, then reaching the IH&S target and a Crab Pattern near 102 in one fell swoop.  In the process, it reaffirmed the dominance of the rising purple channel from 75.56 in October 2012.

    A quick pullback could reassert the white channel; but, if not, the next stop is 105.57-106.98 as soon as May 21.

    But, the daily RSI suggests a very good chance of a quick pullback.

    The Nikkei 225 has loved the yen implosion, zipping through the .618 retracement of the 2007 crash and a well-defined channel top on May 3 and threatening to top the Dow.

    But, the collapse in JGB (and spike in yields) gives one pause.  This is what Abe wanted, but is he prepared for the currency wars he’s unleashed with neighboring Asian countries?  Sri Lanka, Vietnam, Thailand and South Korea have all either cut rates or are about to.

    I wonder whether Japan, with government debt at 240% of GDP, will survive the cure for its economic malaise.

    UPDATE:  9:30 AM

    I’m taking an interim long position on the opening, but will be watching to see what happens at 1631.  My core short position will remain in place unless we get a push up through the red channel midline. Stops on the long at 1626ish.

    I would have been more than content to close out the short at yesterday’s close, but the low for the day was slightly lower than the previous “bottom” of 1623.30, leading me to believe we might see another leg down.

    We’ll see what Bernanke has to say, then check back in.

    UPDATE:  10:00 AM

    A bit of a snoozefest in Chicago.  Bernanke’s giving a history lesson, not saying anything yet about the topic on everyone’s mind: QE.

    SPX just reached the red channel midline mentioned at 9:30, just shy of the .786, and is deliberating next steps.

    The dollar continues to strengthen, making a series of smaller waves higher while remaining above the .886 Fib discussed above.  And, the EURUSD continues to leak lower — just reaching the .236 of the 1.37 high In Feb.

    UPDATE: 11:5 AM

    I’ll be closing the interim long here at 1626 due to the triangle breaking down. Full short for  1613-1617 (favored target about 1614.) Confirms with a drop through 1623; should get a bounces around 1624 and 1622.

    60 min RSI shows a little room to run.

    Watch out for a possible backtest of the triangle to around 1627.75.  Stops on the short at the top of the triangle, currently about 1629.

    If there’s something that could derail any further downside, it’s the EURUSD.

    It reached the .618 of the 1.2743 to 1.3242 rise this morning (small red pattern), and can be expected to bounce.

    It’s also getting dangerously close to the bottom of the light blue channel that rises from July 2012.

    Technically, the .618 is enough of a retracement for this wave to be finished.  But, it certainly doesn’t look finished.  I think it’s more likely we’ll get an intra-day push down to the red .786 (1.2850) or even .886 (1.28) before all is said and done.

    A sustained break of the channel bottom, needless to say, would be exceedingly bearish for the euro and for equities.

    UPDATE:  1:30 PM

    Based on my best stab at placing the falling white channel, I believe SPX just topped out on the day.

    Next stop should be around 1622 at the midline, but ultimately the green 2.618 should come into play where the white channel bottom and red channel bottom intersect — probably around 1614 on Monday.

    The next major support would be the purple midline — around 1593 on Monday — and then the previous high and purple .25 of 1576.

    If I’m wrong, stops at around 1630 ought to do it.  I have to run out till 3PM ET, but will post more when I return.

    GLTA.

    UPDATE:  3:44 PM

    SPX just moved up past my comfort zone — not to mention out of the channel — so I’m switching sides here at 1630.  Next stop 1641-1642?  It’s the 1.618 extension of the fall from 1635 to 1623 and the approximate level of the IH&S.

    Best of all, it will happen on the 13th, which is when we originally had the interim top scheduled.  All is right in the world again.

    Legible chart coming up…

    I wouldn’t normally stay long over the weekend, but I imagine we’ll gap up to 1641-1642 Monday morning, so it’s worth a shot.

    Looks like we’ll probably close at the .886.  We might get a small reversal just ’cause, but Point B in this case was almost the .786, so that technically rules out a Bat Pattern.  Instead, it’s a Butterfly/Crab that should extend to the 1.272 or 1.618.

    Of course, things don’t always go according to plan; but, I like where the currencies are finishing up.

    More in a few…

    UPDATE: EOD

    The revised view from the treetops:

    And, a little closer in…

    “D?” doesn’t work as a Bat Pattern because “B” is higher than the .618.  We could use the reversal at the .500, but “A” is the lowest low, so that doesn’t work.  That leaves a Crab Pattern with roughly a .707 Point B — if it follows the rules.