pebblewriter

Tag: gold

  • Charts I’m Watching: Apr 21, 2021

    Futures are backtesting the 10-day SMA this morning in the wake of the first two day decline since March.

    Look for more to come.

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  • Last Call

    Despite a few tense moments midday, ES held the TL of support from last Wednesday and has rebounded to within 7.50 points of the important Fibonacci extension and channel top at 4153.62.Will the substantial overhead resistance at these levels matter this time? We’ll know very, very soon.

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  • CPI’s Head Fake

    This CPI data is significant in that it shot up over 2% – the highest since 2018 when the prints of 2.95% (July) and 2.70% (Aug) sent the 10Y up to 3.25%. But, it’s the inflation happening right now, which will be reported next month, that the Fed is worried about.

    As we’ve anticipated, March’s 2.6% YoY print was largely the result of a large (22%, should be 28%) increase in gas prices. Though clearly non-transitory food, utilities, used cars and medical services all played an important role. The data next month, however, will put this to shame. As things stand now, April 2021’s gasoline prices (2.77) are up a whopping 60% over 2020 prices.

    As we’ve discussed many times, this should put CPI at over 3% – perhaps closer to 4%.

    The Fed seems to be betting that it can divert attention from the coming data. And, maybe they can, as bond prices seem to be immune to this data and the recent blowout PPI.

    But, it remains to be seen whether the usual algo tricks will be able to handle a CPI print of over 3%.

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  • Charts I’m Watching: Apr 12, 2021

    Futures are off slightly on a low volume Monday following what should have been a bigger reaction to the latest PPI data that was off the charts.

    Either bond traders all took Friday off, or it would appear that the Fed has taken “supporting” the markets to new heights.

    Markets will have another chance to react this morning…unless, of course, VIX futures fail to react to the obvious support.continued for members… (more…)

  • Calm Before the Storm?

    There are many parallels between yesterday and Jan 26, 2018 – the calm before a vicious 10-day 11.8% storm.  The obvious one is that SPX is back to the top of the large yellow channel dating back to the 2009 lows.  Then, as now, this occurred shortly after SPX had bulled its way through a notable Fibonacci extension.There are other significant similarities.  Recall that then, as now, inflation was running hot due to a dramatic, extended rise in oil and gas prices which accompanied a dramatic, extended drop in the US dollar.  From US Dollar: Capitulation posted on Jan 26, 2018:

    …inflation fears remain a problem. In order to relieve those fears, oil and gas would need to drop — especially from the BoJ’s perspective. …they’re both far enough above Jan 2017’s prices to have generated adequate inflation for Jan 2018.  Needless to say, a 10-15% decline in CL/RB would be a drag on stocks, which are no doubt considering a backtest of the 2.24 Fib extension.

    The “inflation problem” in January 2018 was somewhat different from the one facing the Fed now. After months of CPI exceeding 2%, rising oil and gas prices threatened to push it and the 10Y up to 3%. It finally topped out at 2.95% and the 10Y reached 3.25% a few months later.

    Now, we face a dramatic spike from below 2% in February to over 3% in April unless oil and gas prices plunge right away. I remain convinced they will, but the clock is ticking.

    The Fed has said it sees the rise in inflation as transitory and is thus not concerned. More importantly – we should not be concerned. True, the YoY spike in gas prices will pass as the April 2020 plunge falls out of the comps. But, thanks to the Fed flooding the zone with cash, oil and gas aren’t the only problems. Most commodity prices are back above where they were in 2018 and are still rising.

    And, of course, the national debt that weighs in the balance is now over $28 trillion compared to only $20 trillion back then.

    Ordinarily, I might be tempted to ignore such patterns as the rising wedge in place in ES. Maybe not this time…

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  • Stocks to Algos: “Don’t Let Me Down”

    On top of the world, with an adoring crowd gathered below and indifferent law enforcement milling about…there is a bit of a parallel between a famous rooftop concert and the current market.

    As stocks slink into the end of Q1 amidst a bevy of perils, there’s a sense of calm before the storm. Then again, SPX closed yesterday above its 3.618 Fibonacci extension – though just barely this time. Can the algos keep the music playing?

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  • USDJPY’s Turn

    Members will recall that one critical component of our oil/gas decline scenario is USDJPY’s breakout from the falling channel from 2017 shown below.  Guess what?

    The yen carry trade is a tried and true method of goading the algos into buying equities – even overpriced ones. It works especially well as a counterweight to falling oil/gas prices as we first observed in 2015 [see: Did TPTB Crash Oil?]

    So, it’s absolutely no surprise to see central banks pull it out of the playbook at a time when folks are suddenly curious about hidden, systemic risks and oil/gas prices are in the midst of a healthy reset.

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  • The Usual Suspects

    There’s a well-known scene at the end of the classic film Casablanca where Captain Renault (Claude Reins), having seen Rick (Humphrey Bogart) shoot a Nazi in order to enable Ilsa and Lazlo to escape, tells his men to “round up the usual suspects.” It saves Rick, Ilsa and Lazlo’s collective bacon (though I suspect it sucks for the usual suspects.)

    click to play

    So it is with the algos driving equities lately. With oil/gas prices on their back heels and VIX being bid up every day by nervous carbon-based investors, it falls to the the usual suspects in the currency markets to provide algos with the proper “motivation.”

    Think of USDJPY’s breakout not so much as a bug, but a feature of the modern market — one of the many quiddities which allows futures to ramp higher on, say, disappointing economic news.

    While it is sometimes difficult to know when stocks will get much-needed support, these tools have been fairly predictable and have provided excellent trading opportunities.

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  • Update on Gold and Silver: Mar 25, 2021

    We have multiple targets being reached this morning, and several more in the works. We’ll start with ES, which just tagged our SMA50 target in a backtest of the falling white channel from which it broke out two weeks ago.

    The one we’ve been waiting on for what feels like forever, though, is silver. SI broke out of the falling white channel twice before it managed to tag our 30.35 target in January. But, as we discussed at the time [see: Hi Ho Silver]:

    With the SMA200 crawling along toward current prices, we can’t discount the potential for a long overdue backtest.

    We’re finally getting that backtest. But, given DXY’s breakout, we have to wonder whether SI’s backtest will hold. We’ll update the prognosis for silver and gold and also sneak in a discussion of EURUSD, which officially reached our next downside target yesterday.

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  • Don’t Fight the BoJ

    I know what you’re thinking: it’s “don’t fight the Fed.” While that’s generally true, too, the Bank of Japan is the central bank which most conspicuously wears its balance sheet on its sleeve. When my charts are a farrago of bearish indicators, but the Nikkei pushes up through resistance? I’ve learned to ignore the indicators and become bullish.

    Conversely, when the narrative is incredibly bullish but the NKD slips below important support, it’s time to short. For those who haven’t been paying attention, that’s where we are right now. We’ve had a few hints over the past week or so, but the NKD suggests there’s more to come. US stocks just haven’t gotten the message yet.

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