pebblewriter

Tag: inflation

  • Hey Fed: You Break It, You Fix It

    In his January press conference, Fed Chief Jay Powell accepted some responsibility for the sharp rise in housing prices during the pandemic.

    “We’re also well aware that when we cut rates at the beginning of the pandemic, for example, the … housing industry was helped more than any other industry.”

    This statement implies that, were it not for the pandemic, the current inflation picture wouldn’t be burdened by sticky, elevated housing prices. But, that’s just not true. The problem developed long before anyone heard of COVID-19. During both the 2000-2003 recession and (especially) the 2007-2009 recession, the Fed slashed interest rates in order to save the housing market from steep price slumps. The Fed’s belief that it could eliminate the natural cycles which have always existed in our economy ultimately led to even worse fluctuations. The current housing crisis was brought on by fifteen years of historically low interest rates – not just the pandemic rescue.

    Now, the Fed says they don’t have the tools to fix the problem they created. That much is probably true. Runaway prices usually require a recession to bring them back to trend. But, the least the Fed could do is own up to the problem that they themselves created.

    Futures are off moderately, testing the 10-DMA as we approach the open. But, of course, VIX hasn’t been hammered back below its 200-DMA yet.

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  • Charts I’m Watching: Mar 15, 2024

    Futures are flat this OPEX morning as algos weigh the impact of higher than expected inflation, driven largely by rising oil and gas prices.continued for members… (more…)

  • PPI Comes in Hot, Too

    February PPI came in at twice expectations: 0.6% versus 0.3%.  In a replay of the CPI print, stocks dipped for a few seconds before resuming their overnight ramp as algos were more focused on VIX dropping through its 50-DMA just in time for OPEX.

    VIX did pop above the 50-DMA…for several seconds. It got better.Indicators such as RSI still remain on edge.continued for members… (more…)

  • On the Brink, Again

    The last time VIX cratered to below its 50-day moving average in two days, ES popped over 3%. Then, as now, SPX had committed the egregious sin of dipping below its 10-day moving average as it approached important Fibonacci resistance. The difference, now, is that SPX is on the brink of a breakout above that resistance.

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  • CPI Hotter Than Expected

    February headline CPI came in at 0.4% versus 0.3% expected (and January.) Core CPI registered a 0.4% rise versus .03% forecast and 0.4% prior. YoY, headline was up 3.15%, up from 3.09% in January and a slight beat of the 3.1% expected, while core rose 3.8%, down from 3.9% in January.

    Shelter and gas price increases were responsible for 60% of the rise in February.

    This is in keeping with our Gas v CPI model which shows a slight uptick in MoM pricing in the midst of a YoY decline.

    The short-volatility algos were busy this morning, with VIX diving more than 5% in minutes to back below the 200-DMA.

    Futures, which might have been expected to tumble on the expectation of further delays to FOMC rate cuts, rallied instead. continued for members… (more…)

  • Charts I’m Watching: Mar 8, 2024

    Blink, and you might have missed the selloff this morning when nonfarm payrolls came in much higher than expected but the January print was revised sharply lower.Fortunately, the algos were on it, immediately crashing VIX to a point where a 15-pt decline in ES turned into a 15-pt gain.

    This should put SPX at its 1.272 Fib extension, a potentially important level of overhead resistance ahead of next week’s CPI and PPI prints.

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  • Is the Meltup Over?

    We’ve waited a very long time for SPX’s 50-DMA to reach a great spot for a small pullback. It’s finally here.

    Will the market cooperate?

    NOTE: I will be out of the office between March 4-6, returning on March 7.

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  • PCE in Line

    January headline PCE registered a 0.3% increase MoM (0.4% Core) which was in line with most estimates. YoY, headline PCE rose 2.4% versus 2.6% in December, while core PCE rose 2.8%, down from 2.9% in December.

    In other economic data, personal income rose to 1.0% MoM from 0.3% in December and personal spending rose at a 0.2% rate versus 0.7% in December.

    Algos cheered the data, with futures swinging from a moderate loss to a moderate gain in seconds.

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  • Charts I’m Watching: Feb 28, 2024

    Futures are off moderately in the lead up to tomorrow’s important PCE print.

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  • Charts I’m Watching: Feb 27, 2024

    Durable goods ex transportation fell by 0.3% in January, slightly more than expected. Futures rose slightly on the print, but are essentially flat ahead of the important consumer confidence reading.

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