pebblewriter

Tag: inflation

  • Premature Escalation

    As we suspected, Wednesday’s lows weren’t enough to generate a sustainable bounce. We’re seeing the aftermath of that premature technical bounce this morning. Our long held bearish position on EURUSD, for instance, is finally gathering a little momentum.The challenge for bears remains SPX’s 50-day moving average, currently at 5105. If VIX can remain below 18.50, then we could see more meaningful support for equities. If VIX surges past that long term trend line, then the bears could finally have something to celebrate.

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  • PPI: Lower Than Expected

    In contrast to yesterday’s CPI print, PPI came in below estimates at 0.2% headline and core. Futures erased their sharp overnight losses which saw them nail our next downside target and now point to modest gains.

    A bounce here would be more convincing if SPX were to also reach its 50-day moving average.

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  • Inflation Heads Higher: Apr 10, 2024

    March CPI came in at 0.4% MoM for both headline and core (versus 0.3% expectations for both), hotter than expected for the second month in a row.  YoY headline registered at 3.5% versus expectations of 3.4% and 3.2% in February and core came in at 3.8% (unchanged from February) versus expectations of 3.7%.

    As we expected, inflation continues to be buttressed by strong YoY energy, shelter and services prices. Our gas vs inflation model remains on track.

    Futures came within a few points of our next downside target on the print.

    And, algos are finally recognizing that a string of 0.4% monthly prints can turn into an annual print much closer to 5% than 2%.

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  • Charts I’m Watching: Apr 9, 2024

    Futures are moderately higher on the eve of the CPI print that will likely determine the rate cut picture for the next few months.

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  • Charts I’m Watching: Apr 8, 2024

    Futures are up modestly as traders look ahead to this week’s important data dumps: FOMC minutes and CPI on Wednesday, initial claims and PPI on Thursday, and Friday’s U of Michigan consumer sentiment.

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  • Another Blowout Jobs Report

    NFP came in at 303K vs 200K estimates, a huge beat which, combined with a decline in the unemployment rate, argues against any near term rate cuts.

    ES is all over the map this morning, but has given up much of its overnight ramp and is approaching our next downside target. With CPI coming out next week and a likely military escalation in the Middle East, ES will do well to hold its 50-day moving average.

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  • Update on Currencies: Apr 2, 2024

    We’ve seen this movie before. For years, the yen carry trade has been a critical element of the equity price support toolbox. But, all good things must come to an end. When the yen gets too cheap, Japanese inflation becomes problematic as the cost of importing food and energy soars.

    Aside from exposing the ludicrousness of its monetary policy, Japan’s recently unveiled 0.0-0.1% interest rate regime speaks volumes to the pressures of trying to balance economic reality with the desire for ever higher stock prices.

    Slamming the yen’s value works fine – to a point. But, as rising food and energy costs pressure the real economy, something has to give.

    Enter the euro.

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  • The Big Picture: Mar 25, 2024

    Many bears have simply given up betting on a downside that, despite plentiful recession indicators, feels increasingly unlikely. Since the S&P 500 completed its Inverted Head & Shoulders pattern back in December, the index has piled on nearly 14% [see: A Look Ahead at 2024.] The many, many bulls point to a generally strong economy, healthy employment picture, and the transformative potential of AI to justify the market’s historically high valuations. The bears see things differently.

    For an excellent summation of the bears’ case, take the time to read John Hussman’s Universal Capitulation and No Margin of Safety.  He makes some very compelling points regarding valuations…

    We’ve observed greater extremes only twice in U.S. financial history: the week ended December 31, 2021, and the week ended August 26, 1929.

    Other market gurus have also rung alarm bells, from Bill Gross’ warning of “excessive exuberance” to Chris Senyek’s concerns about the “potential formation of another late-90’s-style TMT [technology, media and telecom market] bubble” to Jeff Gundlach’s admonition that “this feels a lot like 1999…there’s a lot of risk in markets that have run this far.”  Even perennially bullish Warren Buffett is sitting on $168 billion in cash, and recently wrote that “markets now exhibit far more casino-like behavior than they did when I was young.”

    We’ll take a look at some of the most compelling economic data and charts that should provide guidance on the remainder of 2024 and beyond.

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  • Breakdown/Breakout

    In a repeat of the most effective algo move of the past 10+ years, VIX broke down following the Fed’s no-news rate decision and press conference yesterday.

    As always, this allowed equities to leapfrog an area of stubborn overhead resistance. continued for members… (more…)

  • FOMC Day: Mar 20, 2024

    Markets are at all-time highs as we await the FOMC’s latest decision on interest rates.

    Note that we’re going on 21 months of a yield curve inversion, the longest since August 1978 to May 1980. Interestingly, the market was flirting with new, all-time highs back then as well.

    Also interesting, that was one of many inversions that was followed by a recession. In fact, every inversion was followed by a recession.

    Is there any reason to expect that this time will be different?

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