pebblewriter

Tag: oil

  • The Latest Cringeworthy Rally

    Sometimes I cringe when I place a target on a chart. Such was the case yesterday when ES reached our IH&S target at 3425. If it kept going, it was sure to backtest the intersection of the broken rising white channel at the falling channel top. Was that likely in the midst of election and pandemic turmoil?

    Apparently so, because that’s exactly where ES ended up overnight.Although I tire of saying it, this is an important threshhold for the overall market – which has benefited smartly from a rescue maneuver that wasn’t even really necessary.

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  • Election Aftermath

    Futures were all over the map last night, with ES’ 113-pt range dictated almost entirely by factors as opposed to election results – which, contrary to Trump’s declaration, are still AWOL. Note that ES tagged our IH&S neckline (also the former H&S neckline) target where it is currently running out of gas.

    As expected, the most important factor was VIX which collapsed over 18% from its overnight highs – slicing through channel midline and the 10, 200 and 20-day moving averages.

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  • GDP Beats, But…

    After the government “put $5 trillion into a $3 trillion hole,” as Ares Management’s Michael Arougheti so eloquently put it, GDP bounced back sharply last quarter. Unfortunately, it’s still down 2.9% for the year.Keep in mind that this is also the advance read for the third quarter, days before an important presidential election, and that all indications are that the pandemic which powered the initial plunge is gathering steam.

    ES is undecided on the import of the data, giving up a nice overnight bounce after slightly overshooting our next downside target yesterday.

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  • Rally Faces Another Test

    Futures have given up all of Friday’s rebound gains and then some, again testing the IH&S neckline and the bottom of the rising white channel from last March.

    At the risk of sounding dramatic, a failure of the channel would mark the end of the current rally and usher in the correction suggested by our yield curve model as detailed on Oct 12 [see: A Cure?] and reiterated this past Friday [Yield Curve Model: Correction Imminent.]

    Stay tuned…

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  • Yield Curve Model: “Correction Imminent”

    Our yield curve model is again sounding the alarm on overpriced equities. Unless the 10Y – which closed its June 8 gap this morning – declines sharply right away, the 2s10s spread signals a sharp equity downturn to finish the correction which began on Oct 12.The bad news for equities? A sharp drop in the 10Y also portends a correction.

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  • Housing Boom: 2007 Redux

    Single-family home starts continued to gain from rock bottom interest rates and the exodus from urban, multifamily housing amid the pandemic. September residential starts grew 1.9%, while permits rose 5.2%, the fastest since the 2007 peak.

    Single-family inventory dipped to 3.3 months, the smallest since 1963, while multifamily starts cratered by 16.3%.

    It was a bright spot of economic news following an ugly day of losses across all indices yesterday that saw ES tumble to our next downside target.

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  • Charts I’m Watching: Oct 19, 2020

    Futures are higher ahead of the open on a slight increase in interest rates and the usual algo-baiting such as USDJPY’s latest bounce.

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  • Retail Sales’ Last Hurrah?

    September retail sales sharply beat estimates, coming in at +1.9% versus 0.8% expected. With enhanced unemployment and virtually all other stimulus having dried up, however, this could be retail’s last hurrah.

    But, it’s enough to boost stock prices on this OPEX Friday 2 1/2 weeks before a presidential election.

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  • The Pandemic’s Stark Reminder

    Futures tagged our initial downside target overnight as markets are once again reminded that the pandemic is far from over.

    The shutdown headlines out of Europe won’t surprise anyone who has been watching the COVID-19 numbers.

    The US, which was considerably less successful in suppressing cases following the initial or second surge, is on the same path – but from a much higher base.

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  • CPI: Putting the Brakes On

    CPI rose 0.2% MoM in September, half the August rate. It rose 1.4% YoY, slightly higher than September’s 1.3%. Without the outsized gains in used cars and the minor gains in energy (conflicting with the official EIA data), MoM CPI would likely have been negative.

    This is hardly supportive of the reflation narrative driving equity prices lately. This should be the last straw for the 10Y’s bounce, with the resulting breakdown a significant headwind for stocks.

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