Futures are essentially flat this morning after Friday’s OPEX panic to regain the 200-day moving average.
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Tag: stocks
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Charts I’m Watching: Jan 20, 2023
Futures are marginally higher ahead of 2023’s first options expiration.
Note that the 2022 Review and 2023 Forecasts are both completed.continued for members… (more…)
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Reshuffling
Futures are up over 0.65% even as VIX has popped 6.25% in the after hours.
What gives?There’s actually a lot of reshuffling going on this morning, with important implications for currencies and equities.
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Taking a Knee
Futures are up moderately as we approach the open, gaining back much of the losses suffered yesterday in the wake of a dismal pending home sales print (-4.0% versus -0.8% expected, the worst since inception in 2001.) Prices fell MoM for the fourth month in a row.
At this point, it appears the bulls are ready to take a knee and let the clock run out on 2022. Unfortunately, 2023 should prove even more difficult.continued for members… (more…)
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Charts I’m Watching: Dec 27, 2022
S&P futures are quiet this morning, back to even after being up about 30 points overnight.
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Give and Take
What the algos giveth, David Tepper (bearish) and Q3 GDP (+3.2% vs 2.9% est. and -0.6% last) taketh away. Futures are off sharply as we approach the open.
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BoJ Rolls the Dice
The Bank of Japan has kept interest rates at or below zero for years. Their bet was that the suppression of interest rates (by purchasing Japan’s net issuance, the BoJ now owns over 50%) would offer sufficient protection against both inflation and the 263% debt:GDP – exacerbated by the rapid depreciation of the yen.
Investors, including yours truly, have had their doubts. While effective at propping up equity prices [see: The Yen Carry Trade Explained], the yen’s plunge greatly amplified food and energy price increases. Inflation reached 3.6% in October. It seemed as though something would eventually have to give.
It just did.
The BoJ just announced that they would allow rates to move to as high as 0.5%, sending the 10Y soaring from 25 to 42 bps…
…and the USDJPY plunging (yen strengthening) by 3.3% – below its 200-day moving average for the first time since Feb 2021.
The BoJ is essentially betting that the small increase in rates will
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FOMC Day: Dec 14, 2022
They’re all important, but this one carries extra significance due to the potential for a slowdown in rate hikes, or at least the commentary regarding one.
Futures almost backtested the 200-day moving average overnight, but are now essentially flat.
After all the excitement yesterday, our targets remain the same across the board. If anything, the hoopla complicated the Fed’s task by aptly demonstrating the persistent froth in the markets.I believe this practically guarantees that Powell will pull another Jackson Hole and scold investors for their irrational exuberance. Whether it will be enough to counteract the OPEX effect is anyone’s guess.
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Crisis Averted
Based on how the market is reacting, inflation is no longer a concern. The Fed will pivot and easy money will be back in no time. Except, as we’ve been discussing, this is one of those weeks which almost always overreacts to the upside: FOMC meeting, OPEX, end of year, etc.
As noted yesterday, the dreaded bearish signals such as a simple 10/20 cross have been averted – at least for now – and the algos are throwing a party.
Yesterday’s gap higher in VIX (in conjunction with a 1.4% rally in stocks) was indeed a massive head fake in light of this morning’s 13% smackdown. Talk about closing a gap…
From where I sit, however, the Fed’s job just got tougher. While monthly CPI came in slightly lighter than expected, we still have problematic wage and rent inflation, and financial conditions are getting looser, not tighter.
Remember Jackson Hole? Maybe it’s VIX’s 13% plunge which is the headfake…continued for members… (more…)
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All In a Day’s Work
Mystified by the fact that futures ramped higher overnight even though VIX is up over 6%?
It’s all in a day’s work for the algos, especially on the eve of a critical Fed decision in an OPEX week at the end of the year when the S&P 500 is facing a bearish 10/20 cross.
The point, of course, is to prevent that 10/20 cross which (as the futures demonstrate) is child’s play.
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