pebblewriter

Tag: gold

  • Fear and Greed

    ES is reaching our next downside target right on schedule.Note that if ES hadn’t spurted past its February highs in late August, falling to our 100-DMA target would have involved a fairly shallow drop of 5.5% and would have preserved the rising white channel.

    Instead, we have a 10.8% loss so far and face much greater technical damage if support isn’t retaken – all for the sake of completely unjustified higher all-time highs.

    Fear and greed. It’s the same old story when it comes to markets, even in the age of algorithms and central bank interference.

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  • Inflation Tops Estimates…Again

    Let’s talk about inflation. At 0.4%, both headline and core handily beat consensus of 0.3% and 0.2%. Why?

    This morning’s CPI release is a treasure trove of information regarding price action in the general economy.  On an annual basis, energy tanked and food soared. MoM, food was still strong while energy and used cars soared in value.

    So far, the market isn’t concerned. It should be.

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  • Having Fun Yet?

    Stocks nailed our second downside target from last Friday [see: Correction Warning.] Judging from the financial press, it was a shock to the average investor.  It’s sad that a 4.5% correction would warrant such concern. But, as I often say, that’s the world in which we’re living.

    Bulls need February’s highs to hold, while bears are rooting for the algos to follow the direction offered by currencies and bonds.

    Many Robin Hood traders and newbie option “investors” are no doubt wondering why they didn’t pick up a good book instead of plunging into the market. These are indeed difficult times.

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  • Dire Straits

    After a couple of days of VIX rising while stocks spiked higher, it only makes sense that VIX is falling while stocks are tumbling. This is the bizzaro world in which we’re living.

    Unless it bounces sharply on our channel bottom target today, add CL to the list of algo drivers which have experienced a bearish (for stocks) 10/20 cross. It has been in a bullish alignment since May 11.

    Recall that RB crossed on Tuesday and USDJPY crossed on Aug 27. Despite the administration’s insistence that everything is peachy, the evidence is building that the market will finally take notice of the economy’s dire straits.

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  • DXY Breaks Trend

    VIX’s 10/20 cross held yesterday, meaning we almost got a lower low on the day. The overnight ramp job was good for 32 points before DXY started attracting attention. It has dropped below the falling trend line it was patiently following, meaning our forecasts in the currency space are accelerating – especially EURUSD and silver.

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  • Why Argue?

    Futures tagged our white channel midline target again overnight… …before bouncing when VIX reversed for the third time at trend line resistance.Note that ES’ white channel midline was first topped back on March 25. Since then, it has been tested 12 times. Clearly, someone thinks it’s pretty important. Who am I to argue?

    All I know is that with interest rates and inflation suddenly on everyone’s radar, oil and gas are out of the equity-propping game. The dollar is bouncing today, but has broken down below some very long-term trends. So, USDJPY should be of little help.

    Even the Fed has watered down its enthusiasm for driving the market higher now that it’s back to February’s highs. The unspoken message to the politicians: we got it back to previous highs, it’s your turn now.

    So, aside from the usual VIX games, there’s not a whole lot to propel stocks higher. So, will the midline continue to hold?

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  • Breakout or Headfake?

    Today’s post could be an extension of yesterdays, with more beneficiaries of the shutdown such as Target and Lowes reporting big beats.  Winners and losers.

    Curiously, ES failed to make a new high yesterday even thoughy SPX briefly rose above its February highs.

    You’ve always had to worry about predatory traders and specialists trying to catch momentum traders offsides, pushing above resistance in order to stop out shorts and draw in fresh meat.  These days, the players have expanded to include predatory HFTs, algos, central banks, the US Treasury, politicians, etc. The list of “interested parties” is long and distinguished, and most of them have access to plenty of free capital.

    So, as we always ask when SPX reaches new highs: breakout or headfake?

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  • Winners and Losers

    Watching WMT this morning and wondering what it all means?  After surging nearly 7% on blowout earnings, the stock has given up all its gains after the company’s commentary confirmed the obvious: there are winners and losers in a pandemic.

    Unlike many of its general retailer competitors…Walmart sells groceries, meaning they were allowed to remain open even during the worst of the virus’ spread. They also have a substantial online business, helping them offset the slowdown in in-store shopping. Last, customers who might otherwise have run out of money when laid off received checks from the government which allowed them to continue shopping for low-priced essentials.

    The problem WMT faces, of course, is what happens now that these checks have stopped. Will the stock recouple with the economy? Moreover, will the overall market recouple with the economy?

    The old adage that “the market is not the economy” has never been more true. Pundits and politicians see major indices push to new highs and declare that the worst is over. The reality is that the AMZNs and WMTs of the world are simply taking market share from the millions of small businesses that couldn’t stay alive for the past five months.

    For all the major retailers which have declared bankruptcy so far this year…

    …there are hundreds of thousands which have done so with no fanfare nor headlines in the WSJ. They slip quietly away into insolvency as their PPP money (if they were able to obtain it) runs out and the bank account runs dry.  They’re not publicly traded, so they don’t affect the market. But, the effects will be felt sooner or later. And, more will join their ranks as the country continues to fail the coronavirus marshmallow test.

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  • PPI’s Big Beat

    PPI was expected to tick 0.3% (0.1% core) higher in July. Instead, headline PPI soared 0.6% and core popped a stunning 0.5% – the highest since October 2018.

    The impact on stocks has been muted so far, as the market is still giddy over the potential release of what is essentially a Phase 1 vaccine out of Russia. The impact on bonds, however, has been significant. 10Y yields have broken out of a long, slow decline.

    When you’re piling on debt (with record-setting duration) the way the US is, higher interest rates are not good news.

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  • 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?

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