pebblewriter

Tag: stocks

  • Delay of Game

    Nothing much has changed since yesterday.  SPX bounced around in our target zone, coming within a few points of its SMA200 as VIX went nowhere.

    The one notable exception was AAPL, which after tagging our downside target on Jan 3 $from last November [see: AAPL Discovers Gravity] reached our upside target yesterday. We originally charted this upside target on Jan 3 [see: Update on AAPL, Jan 3] and the IH&S pattern reinforced it three weeks later.  Had AAPL not reversed, the additional downside potential was substantial.

    continued for members… (more…)

  • Update on Gold: Dec 26, 2018

    Back on August 15, we noted that gold was nearing an important downside target.  From Charts I’m Watching: Aug 15, 2018:

    [Gold] has reached triple support –the .618, yellow TL off the 2011 highs, and the red TL from 2010.  We’ve targeted 1173.60 since the yellow TL broke down in May and gray channel broke down in June.  I strongly suspect it will bounce here.

    GC dipped slightly lower, bottoming out at 1167.10 the following day, then began an arduous climb that reached our 1268.30 target last week.

    As it threatens a breakout, we’ll take a fresh look at the road ahead.

    continued for members…

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  • AAPL Discovers Gravity

    A quick update on AAPL, which has reached two of our downside targets today…

    As we discussed prior to AAPL’s earnings report [see: All Eyes on AAPL] the stock had a gap to close and 200 DMA to backtest.  The danger in reaching both targets was that AAPL would have to descend below the triangle top above which it broke out in August [see: Focus on the FAANGs.]  But, as we discussed, this wouldn’t necessarily be all that alarming.

    A drop to 200 or so wouldn’t do much to dent bulls’ enthusiasm. Even a drop to the SMA200, currently at 192.17, could be passed off as a base-building exercise.

    It’s been almost two weeks since AAPL posted earnings, and it just reached its SMA200, (one day after closing the gap) posting a low today of 191.45 — an 18% drop from its Oct 3 highs.  Needless to say, some bulls are getting nervous.

    A quick glance at the weekly chart shows why.  If the rising red channel from 2016 doesn’t hold, it’s quite a ways to the first serious support down at the purple channel midline.  Maybe it’s time to expand the company’s stock repurchase plan.Don’t own any AAPL? Wondering why you should care?  Drops through AAPL’s 200-DMA have been a trap door to some big swoons for the overall market.

    With our yield curve model and oil/gas charts screaming “short!” I’d give better than even odds that AAPL’s channel and the overall market are headed lower.  If AAPL closes below its SMA200, I’d say it almost certain.Stay tuned.

    UPDATE:  Nov 14, 2018 – 3:45 PM

    AAPL closed below its SMA200 and its red channel is failing.  As we noted a couple of weeks ago, the nearest significant support is now the .618 Fib at 144.48. (more…)

  • Appearances

    Credit: REUTERS/Jonathan Ernst

    It is often said that there are two sides to every story and, somewhere in middle, lies the price of oil.  Okay, I paraphrased that just a bit.

    But, isn’t it odd that the day after the Saudis threaten $400/barrel oil, Donald Trump suddenly embraces the ludicrous “rogue killers” theory for the death of Washington Post columnist Jamal Khashoggi?

    It appears that after days of vehement denials of any involvement, the Saudis suddenly remembered that Khashoggi was, in fact, assassinated and dismembered in their Turkish embassy (Saudi operative: “Oh, yeah…that guy that we chopped up with a bone saw?  I had forgotten all about that!)

    After a 20-minute conversation, the president who fell in love with Kim Jong-un also came to terms with Saudi King Salman.  Was it love?  To quote the master of the deal, himself, who knows?

    But since Trump is desperate to reverse the rise in gas prices, inflation, and interest rates between now and November 6 (and, to salvage billions in arms sales) don’t be surprised if we get that next leg down in oil prices very soon.  Nobody knew the economy could be so complicated!

    And, while we’re on the topic of government prevarication, the much-delayed September Treasury Statement was finally released yesterday.  Anyone notice something odd about September outlays?  Did we really see a plunge in every expense category?  Or, maybe, someone decided to massage the numbers just a bit to prevent the report of a $1 trillion deficit.  Appearances, again.

     

    Nah…then we’d surely see other efforts to obfuscate the country’s fiscal plight.  For instance, they’d never allow charts like this one from the August report.

    The same chart in September…  (appearances, indeed!)continued for members… (more…)

  • Investing for Dummies

    I use scores of chart patterns, Fibonacci grids, technical indicators and proprietary models in my daily attempts to forecast various markets.  Some are fairly complex, multivariate models that involve a half-dozen inputs.  Others are quite simple.

    One of my favorite simple indicators is the well-known 10-day/20-day moving average cross. It maintains that when the SMA10 crosses below the SMA20, it’s generally bearish. When it crosses back above, it’s bullish.

    Of course, in a heavily “managed” market such as the one I’ve been posting about for the past 7 1/2 years, the crosses are occasionally head fakes.  The cross is well-known and a component of many algorithms.  So, it’s not unusual for markets to reverse rather soon after such a cross.  Sometimes, markets even reverse just before a likely cross in order to avoid one.

    The yellow arrows below mark the various bearish crosses so far in 2018.  The thin red line is the SMA10 and the white line is the SMA20.  Other moving averages are the 50 (purple), 100 (yellow) and 200 (thick red.)

    Only a couple 10/20 crosses were followed by significant sell-offs: Feb 6 and Mar 22.  The others produced either moderate or modest declines (i.e. head fakes — the purple arrows) or near misses (the white arrows.)  I mention it this morning because we’re experiencing another 10/20 cross in the pre-market.

    There is much bearish commentary out there.  VIX just broke out of a 8-month trend, tagging our next upside target yesterday.  SPX and ES have both tested the critical support we identified last week [see: The 10Y Breaks Out.]  And, the usual suspects involved in a rescue operation are, so far at least, MIA.

    Will this be another head fake/near miss — or the real thing?

    continued for members…

    My best guess continues to be that if 2878.50 (SPX 2872.87) doesn’t hold, we’ll see the white channel get fleshed out.  If the white channel doesn’t hold, it opens up the SMA200 and, ultimately, the 2.24 at ES 2728.79 (SPX 2702.78.)

    SPX wouldn’t flesh out its white channel until reaching 2800 – the white .786 Fib.  Again, if the white channel fails, we’re looking at the SMA200 at 2765 and the 2.24 at 2703.62.

    CL and RB are getting a little bump from Hurricane Michael and the usual MENA-based speculation.

    Note that RB, in particular, has clung to a smaller rising channel.  It won’t last.

    USDJPY still looks likely to backtest its SMA100 at 111.19 or .500 at 111.78 — which lends credence to the downside case – at least on an intra-day basis.VIX continues to be the big question mark.  It has clearly broken out of the falling white channel.  If given free rein, it still has plenty of upside potential with 24.20 looking very reachable. I’ll be out all day today.  More later this evening or in the morning.

    GLTA.

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  • Crypto Carnage

    As the currency turmoil continues, it’s interesting to note that cryptocurrencies are having a worse go of it than EMs.

    Meanwhile, futures dipped enough overnight to finally backtest the SMA10.  They’ve since rebounded enough to backtest the broken red channel.  It remains to be seen whether SPX will join in and backtest its SMA10 and whether both can manage a backtest of their January highs.

    On the commodity front, RB finally tagged our next downside target — cratering 4.5% from yesterday’s highs.

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  • Currency Complications

    USDJPY reached our target at the SMA100/SMA200 overnight, at least temporarily bringing the pair back below the top of the falling white channel from which it broke out on July 10.  Readers will recall that breakout was instrumental in helping SPX break above its faux IH&S neckline 66 points ago.

    A USDJPY rebound here is all stocks might need to make new highs.  EURUSD, which is backtesting after a major channel breakdown, would certainly support a strengthening of the USD……as would DXY — which is the latest victim of “unpresidented” tweets.

    As central bankers have recently discovered, however, there are complications from continued dollar strength which would suggest that it will take a break here.  Will they heed those warnings, or are new all-time highs in equity markets more important?

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  • Charts I’m Watching: Aug 20, 2018

    Futures are hanging on to a 4-pt gain, primarily on a continuing decline in VIX.  With Jackson Hole coming up, we could see more volatility — particularly if Fed speakers back off their hiking schedule.

    Speaking of backing off…TSLA is back down to its horizontal and trend line support.  As readers will recall, this is a critical line in the sand.As we concluded last May [see: Can TSLA Avoid a Crash?] a drop through this key level could easily land the stock below 200.  Our chart from back then, before the craziness really got going…

    Apparently JPM has also adopted this view.  And, an increasing number of observers are coming to the same conclusion we did a couple of weeks ago regarding Musk’s emotional state [see: Is the Pressure Getting to Elon Musk?]

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  • Is Market Integrity Even a Thing Anymore?

    Want to know where markets are going?  Just check Facebook.  The stock, that is.

    As I pointed out in March [see: Facebook Flops] the stock is a very reliable indicator of overall market direction.  And, right now, it’s threatening new all-time highs.

    But, its accomplishment raises an important question: does it matter how the stock got to where it is?  What about market integrity and price discovery?  Do they matter?

    As we’ve discussed, each time FB tagged or dropped through its 200-DMA (the red line below,) the S&P 500 swooned — or even underwent a full-fledged correction.  The 2015-2016 correction is the most obvious.But, FB’s November 2016 dip was potentially more serious.  Not only did the stock drop through its 200-DMA, but it remained there long enough to produce a bearish death cross, where the 50-DMA crosses below the 200-DMA.

    The impending death cross could be seen a mile away.  So, after a week of the stock lingering below its 200-DMA, the FB board announced a $6 billion stock buyback plan.  The stock bounced a few times, finally clearing the 200-DMA on the very same day that the death cross occurred.  What better way to convince investors that the death cross wasn’t anything to be concerned about?

    Facebook doesn’t publish detailed transaction reports for stock buybacks; but, it seems likely that the shares purchased under the plan were timed to help the stock clear its 200-DMA.FB ran up to new highs, ignoring the 4.23 Fib extension as it had all the others.  A year later, however, it managed to drop back below its 200 DMA.   In the process, it completed a bearish Head & Shoulders pattern that targeted 133-140 — another 17-20% drop on top of the 13% it had already shed.

    After dropping through the neckline of the H&S Pattern, the stock couldn’t even manage a full backtest before plunging anew. The dreaded death cross occurred on April 13.  On the 25th, the company announced a $9 billion expansion of the stock repurchase plan.  This was particularly significant, as there was still $4 billion left over from the original $6 billion plan.

    The very next day, FB spiked up through its neckline and 200-DMA. Since then, it’s tacked on 25%.  Are any shareholders complaining?  Of course not.  Ditto for the many employees who own shares.  So, what’s the problem?  All’s well that ends well, right?

    I suspect most investors would agree with that sentiment.  There has been little outcry, even though 54% of corporate profits — over $5.1 trillion — has been dedicated to buybacks over the past 10 years.

    Prior to 1982, buybacks were prohibited.  They were considered a form of market manipulation. After passage of Rule 10b-18, however, corporations were offered a safe harbor as long as they met certain conditions.

    Supporters of buybacks say they are beneficial.  Over half of all Americans own stocks, even if indirectly through a 401(k.)

    Critics maintain that they are a financial engineering trick, inflating EPS even if profits aren’t actually growing.  Chrisopher Cole of Artemis Capital figures that 40% of EPS growth since 2009 is from share repurchases.

    NYU professor Edward Wolff says they benefit the rich more than anyone else, as the top 10% of households own 84% of all stocks.  Yale professor Robert Shiller calls buybacks “smoke and mirrors.”

    It’s safe to say that as long as corporate management can borrow money at historically low rates in order to drive their stock higher, the practice will continue.  But, it’s hard to look at a stock like FB without wondering whether market integrity is still a thing.

     

     

     

     

     

  • CPI: The Games Continue

    Everyone who drives knows that gas prices increased more than 3% month-over-month  – the official, seasonally adjusted numbers from the BLS in this morning’s CPI report.  Data put together by non-governmental sources confirms it.But, folks like GasBuddy and AAA aren’t responsible for cost of living adjustments for millions of Americans.  So, unlike the BLS, they have no incentive to fudge the numbers. Maybe they’re also aware that gas stations don’t allow customers to pay the “seasonally-adjusted” price.

    Using the EIA’s (also fudged) numbers, gas prices were up 6.2% for April — more than twice BLS’ goal-seeking 3%.  So, the BLS was able to report 0.2% instead of the 0.3% expected for April CPI.Similar games are played, of course, with respect to shelter (+3.4% YoY,) medical care (+2.2%) and vehicles (-1.6% new, -0.9% used.) I’ll pick on vehicle data this morning, as it illustrates another shortcoming of the BLS approach.

    Consumers buy food and gas every few days, while they tend to hold on to vehicles for several years at a time.  Even if vehicle prices were to drop, that savings wouldn’t flow through to a consumer until they purchase a vehicle.  When they did, of course, they’d be hit with higher interest rates than were in place last month or last year.

    The algos don’t care much about the veracity of the numbers.  Futures are up 8 points ahead of the open — another overnight VIX bashing that has it below the SMA200 and about to test the .886 Fib and channel midline at 13.23ish.  While it’s nice to nail a forecast, it’s distressing to see how easily the algos can be manipulated. The flip side of under-reporting inflation, of course, is the effect it has on currencies and interest rates. With “no” inflation pressure, interest rates have receded from 3% — sapping some of the dollar’s strength. continued for members… (more…)