pebblewriter

Tag: stocks

  • 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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  • 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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  • 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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  • A Cure?

    Despite the number of US coronavirus cases nearing 8 million and deaths approaching 220,000, the algos continue to focus on their daily dose of collapsing VIX.

    It’s enough to make one wonder whether central bankers have found a cure for a market correction.

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  • More Gimmicks, Higher Highs

    More gimmicks, higher highs. It’s getting to be an old story. But, as long as voters and algos don’t know or care, it will continue.

    Futures were in danger of giving up Tuesday’s 3421.75 highs when VIX suddenly collapsed by 7% in a matter of seconds.When that didn’t immediately result in a sufficient boost, it happened again, this time around the jobless claims miss at 8:32 and yet again at 9:02 (by 9.8%) for good measure.

    Higher highs, no problem.

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  • Trade Troubles

    The trade deal: the gift that keeps on giving.

    The August trade deficit came in at $67.1 billion, the largest since 2006 – partly a reflection of the pandemic but exacerbated by a 9.3% collapse in the value of the DXY since its March highs.

    At the same time, oil and gas prices have spiked sharply higher since reaching our downside targets on Oct 2. So, bond traders can be forgiven for bidding up the 10Y to nearly 0.80%.If the past is any indication, DXY has much further to go and trade deficits will continue to rise – hardly the outcome the White House promised amid the destructive trade talks in 2018. Remember when the market rallied on every rumored breakthrough?

    No worries, though, as VIX “coincidentally” collapsed by 10% in a matter of seconds, thus preserving a positive open.continued for members… (more…)

  • It’s Not Trump

    It’s not Trump, it’s the algos. While the mainstream media focuses on rumors regarding Trump’s return to office, the algos are zeroed in on VIX’s latest failure push above its 200-DMA.This is a kitchen sink moment. Oil and gas are pitching in, with 4.5% and 5.5% pops respectively in the pre-market. And, even USDJPY is threatening a bullish 10/20 cross.

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  • The Dollar’s Demise

    If our charts are to be believed, we are on the cusp of a significant move in currency pairs and the bond yields.

    10Y yields plunged back in March, then began rebounding via a long, drawn-out flag pattern that broke down in late June. Since then, it has been tracing out an equally long, drawn-out triangle pattern that has also broken down.

    It has correlated nicely with DXY, albeit with a 2-3 day lead. If TNX’s latest breakdown holds, we might finally see the next leg down in DXY and the long-awaited, significant moves in USDJPY and EURUSD.

    Needless to say, the dollar’s demise hasn’t helped the trade deficit, which just reached all-time highs despite White House’s claims to have strengthen the trade picture.

    It also doesn’t bode well for stocks. If the past is any indication, October could be a very difficult month.

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  • Because They Can

    A new week, a new breakout in the after-hours for no particular reason.

    And, just when the ramp job started to waver, a 5.6% smackdown on VIX – no news, just a reminder not to focus on the pandemic, the millions out of work, our dysfunctional Congress, the coming election battle, Trump’s tax troubles, etc.

    Why? Because they can.

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