pebblewriter

Tag: rising wedge

  • Charts I’m Watching: Sep 30, 2024

    Futures are slightly lower on the last day of a pretty impressive Q3 at +8.7%.Can the rally keep going in October?

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  • 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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  • 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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  • 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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  • The Big Picture: Feb 27, 2023

    Last week completed the backtests we’d been expecting, with ES, SPX, COMP, DJIA and NKD all holding important technical support.While the fundamental picture might not justify these prices, the algos are satisfied. And, until price discovery reemerges (if it does), the algos are all that matter.

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  • Charts I’m Watching: Jan 23, 2023

    Futures are essentially flat this morning after Friday’s OPEX panic to regain the 200-day moving average.

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  • Charts I’m Watching: Dec 7, 2022

    Futures have rebounded from the worst of their overnight losses, but are still on the wrong side of the tracks following yesterday’s breakdown of the rising wedge.

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  • Charts I’m Watching: Nov 28, 2022

    ES came within 10 points of tagging its 200-day moving average on Friday and is backtesting its 3.618 Fibonacci extension yet again.

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  • Retail Sales (Sort of) Flat

    July retail sales came in at 0.0%, a goose egg, versus expectations that were generally around 0.1-0.2%. These data aren’t adjusted for inflation, however, so the “real” change was another drop.

    Markets seem to care at the moment, with ES off nearly 1%.  But, our charts had already called for a reversal yesterday after reaching upside targets across the board.

    With Fed minutes coming out at 2pm ET and VIX still unable to push past the considerable suppression that has been applied at the 10-day moving average (20.51), bears should continue to exercise caution.From a fundamental standpoint, this retail sales report is horrible. It’s disappointing because it’s flat rather than up, of course. But, it’s much worse because it’s not bad enough to sway the Fed from inflation fighting.  We’ll get a peek at their minutes in a few hours, but suffice it to say this bad news is just plain ol’ bad.

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  • Charts I’m Watching: Nov 5, 2021

    The 531K payrolls beat and Pfizer COVID-19 pill could influence the taper schedule. The 4.9% increase in wages should.

    Energy and food prices might well fall over the coming months. But, wages are sticky. Whether due to contracts, minimum wage rules, or just market forces, they are very difficult to reduce. While it’s true that workers need higher wages in order to keep up with spiraling cost inflation, this is undoubtedly more fuel for the non-transitory inflationary fires.

    Futures are up sharply on the news, which has the factors wondering what to do at ES 4700. Having delivered stocks (with a few trillion in help from the Fed) to all-time highs despite lackluster and occasionally bad news, what should they do with really good news that might speed up the taper?

    Stay tuned.

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