pebblewriter

Tag: inflation

  • New Highs for CPI

    CPI reached a new cycle high in June: 9.1% versus expectations of 8.8%. This is the highest print since November 1981. Core came in at 5.9%. Monthly prints were 1.3% headline and 0.7% core.

    The recent decline in oil and gas prices – although substantial – came too late to help mitigate June inflation. The Jun YoY price increase in gas remained strong at 60.73% – among the highest readings recorded in recent years.Futures are dumping on the news, as it clearly takes smaller Fed rate hikes off the table. VIX is even forgoing its usual pre-market dump and breaking out instead.Our analog remains on track.

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  • Small Business Recession Warning

    If small businesses are the backbone of the economy, we’re in deep trouble. So says the NFIB’s Small Business Optimism Index, which reached an all-time low last month. From the report:

    The NFIB Small Business Optimism Index dropped 3.6 points in June to 89.5, marking the sixth consecutive month below the 48-year average of 98. Small business owners expecting better business conditions over the next six months decreased seven points to a net negative 61%, the lowest level recorded in the 48-year survey. Expectations for better conditions have worsened every month this year.

    Key findings:

    • The net percent of owners who expect real sales to be higher decreased 13 points from May to a net negative 28%, a severe decline.
    • Fifty percent of owners reported job openings that could not be filled, down one point from May, but historically very high.
    • The net percent of owners raising average selling prices decreased three points to a net 69% seasonally adjusted, following May’s record high reading.

    Meanwhile, the market is pinning its hopes on a CPI number (due out tomorrow) that isn’t so bad that interest rates must be raised my more or so good that they signal a recession.

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  • Charts I’m Watching: Jul 11, 2022

    Futures are off moderately, with moves in currencies supporting our analog’s continuing bearish stance.

    All eyes are on Wednesday’s CPI print, with initial claims and PPI on Thursday and retail sales and Michigan sentiment on Friday.

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  • Update on Currencies: Jul 6, 2022

    EURUSD and DXY have officially tagged the targets we set for them several months ago.  Recall that in the Mar 7 Update on Currencies, we noted that the Ukraine invasion could accelerate DXY’s next leg up.

    The yellow .707 at 106.276 and white 1.272 at 106.741 both intersect the white channel top in late 2022 – but it seems unlikely that DXY would wait that long to make its move given the fluidity of the Ukraine invasion.

    We noted in April that DXY had broken out of its rising red channel and, based on our analog, was likely to reach the target in July – which is exactly what it did.

    The move was made possible, of course, by EURUSD crashing as we expected. From that same post:

    There are many potential targets between here and the H&S target of .785. The first is the 1.06 lows from 2020, followed by the 1.03 lows from 2016. Once those break down, of course, the euro will face the 1.000 support, also the yellow .618, possibly as early as mid-March.

    The ECB fought the breakdown as long as it could. With inflation and fragmentation both surging, the current plunge has caught many off guard.Then there’s the hapless BoJ, sitting quietly in the corner hoping that no one notices just how fundamentally broken it is. We’ll update all the big picture charts today, focusing on their connection to the plunge in equities over the next two weeks.

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  • That Sinking Feeling

    As anyone on a budget could tell you, the headline of this post is hardly news. Income isn’t keeping up with expenses, and isn’t likely to any time soon.

    The Fed might prefer PCE over CPI because it ignores food and gas prices. But, it’s those very categories which are making it difficult for the average family to make ends meet.

    Futures were already off by 1.25% before the data hit the wires. Our analog, still on track, suggests the decline is going to accelerate in the coming weeks.

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  • Charts I’m Watching: Jun 28, 2022

    Futures are up modestly, backtesting the 20-day moving average for a second day. Time to buckle up.

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  • Charts I’m Watching: Jun 23, 2022

    Futures just backtested the 10-day moving average and our analog trendline, leaving the door open for a pullback – as long as VIX doesn’t get clobbered again.

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  • Inflation Reaches a New 40-Year High

    CPI soared to a new 40-year high: 8.6% YoY and 1.0% MoM. Core also exceeded consensus, coming in at 6.0%.

    Futures are not amused, as this takes anything less than a 50 bps rate hike next week off the table. A 75 bps hike is suddenly a real possibility.

    Needless to say, our analog remains very much on track.

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  • Charts I’m Watching: Jun 6, 2022

    Futures have bounced about 1% overnight, retracing a Fibonacci 61.8% of the losses from Thursday’s highs.

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  • Productivity: Worst Since 1947

    The first quarter decline in non-farm productivity was the largest since 1947. The chart below from briefing.com shows the 7.5% plunge, contrasted with an 11.6% increase in unit labor costs. If the country had locked down during this time, you might be able to make an argument that a recession isn’t necessarily coming. But, this slowdown came courtesy of a 2.4% output decrease. In other words, it’s another reason to believe a recession is here and a soft landing ain’t in the cards.

    Futures have been all over the map overnight, but are currently hanging on to the channel bottom from May 20. Note that we finally got that 10/20 cross and are nearing a backtest of the 50-day moving average – just in time to set up a nice trap.

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