pebblewriter

Tag: interest rates

  • On the Brink

    As we stated in yesterday’s update…

    …the downside case would be damaged considerably if NVDA were to come out with stellar earnings and outlook that boosted ES back into the rising yellow channel.

    NVDA’s stellar earnings and outlook did, in fact, boost NVDA back into its previously broken channel.

    The resulting algo spasm, however, boosted ES back to but not into its own broken channel.  It has stalled right there on the brink, leaving both bulls and bears scratching their heads.

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  • All Good Things…

    All good things must come to an end, or so the saying goes. For NVDA, it’s clear that the stock’s rally since the end of 2023 was following a very steep and narrow acceleration channel. These sorts of patterns feed upon themselves. As long as no one upsets the apple cart, there are outsized profits to be had. But, when things break, they tend to break in a big way.

    Futures are slipping ahead of the opening, with numerous downside targets coming into view. Of course, the downside case would be damaged considerably if NVDA were to come out with stellar earnings and outlook that boosted ES back into the rising yellow channel. FOMC minutes are also due out.

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  • Charts I’m Watching: Feb 20, 2024

    Futures are off moderately this morning as investors prepare for FOMC minutes and NVDA earnings tomorrow.

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  • Stagflation Fears Renewed

    January PPI came in much hotter than expected while housing starts and permits fell far short of consensus, stoking persistent fears of stagflation.  PPI came in at 0.3% MoM versus 0.1% expected.  Excluding food and energy, core PPI rose 0.5% versus 0.1% expected. Stripping out trade services, the tally rose to 0.6%, its highest print since January 2023.

    Monthly gains in the index for final demand for services again outpaced that for goods at +0.6% versus -0.2%. Had energy prices not continued their decline (-1.7%) the print would have been even more alarming.

    Futures had been slightly higher overnight, but fell into the red after the closely followed prints. continued for members… (more…)

  • Retail Sales Warn of Economic Woes

    Retail sales plunged 0.8% in January, far below estimates of -0.2% and last month’s +0.4%. The miss can’t be attributed solely to seasonality, as the Jan 2023 print was a massive +3.7% gain. The annual gain from Jan 2024 was a meager 0.6%.

    It has been a tough week for economic data. Inflation higher than expected and retail sales much lower than expected – sounds like a recipe for stagflation. With the UK officially sliding into recession, can the US be far behind?

    Futures have given up some of their slight overnight gains.

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  • A Technical Recovery

    Thanks to VIX being hammered by 20% from yesterday’s highs, futures have recovered almost .50% – just enough to reach the bottom of the channel from which they broke down. SPX experienced a similar recovery late in the day, preserving (for now) the integrity of the channel that has produced a stunning 23% return since Oct 27.

    Stock prices almost always melt up into OPEX days. When they don’t, however, they often perform a nosedive instead. SPX remains long overdue. A lasting breakdown of the channel, such as we almost saw yesterday, would be the first sign.

    Another would be the 10Y shooting up past our 200-DMA target, which it came within 0.19% of yesterday. The bulls really need rates to settle back down – which will be very unlikely if oil/gas don’t reverse lower.

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  • Hot CPI Dashes Rate Cut Hopes

    January CPI came in hotter than expected, taking a March rate cut off the table and casting serious doubts on a May rate cut.

    Futures are off sharply, shedding over 1% to reach the bottom of the rising green channel from Oct 2023.

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  • All Eyes on CPI

    CPI, due out tomorrow morning, always plays an important role in driving interest rates and economic forecasts. This one is especially important given the extent to which the market has already rallied in anticipation of lower rates.

    Our gas price model for CPI shows inflation settling lower after a slight bump up over the last several months. But, what happens if events in the Middle East begin to affect oil/gas prices?

    At current prices, our model suggests CPI should continue to moderate – remaining around 3-3.25%.  Again, this is if gas prices were to remain steady around 3.02 for regular conventional gas prices as reported by the EIA. This would result in the current -9.13% delta rising very slightly to -8.57% in February, then widening to as much as -19% by August before rising back toward 0% by January 2025.

    In the past, these large negative deltas have correlated with CPI readings of 2% or less. Ceteris paribus, this would suggest a CPI in the 2% range by election time. But, what happens if hostilities in the Middle East expand and gas prices revert to 4.0? It’s a very different picture.

    Bottom line, the Fed and the Biden administration are likely of one mind on the topic of Middle East affairs. A broader war that sends prices higher would be disastrous for both.

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  • Oh So Close…

    The S&P 500 came within 11 cents of 5,000 yesterday, marking a remarkable 43% run since the October 2022 lows and 22% return since the October 2023 lows.

    The month of February has a mixed track record over the past 10 years, with gains and losses evenly split. Stocks frequently pause at big, round numbers – which conflicts somewhat with the fact that stocks usually melt up into CPI prints.

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  • Charts I’m Watching: Feb 6, 2024

    Futures are slightly higher on the heels of VIX’s 7% collapse from yesterday’s highs (on a day when stocks were broadly lower.)

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