Already elevated on AAPL’s announcement of a historic buyback, futures popped on a weaker than expected jobs report.
The only problem is that this ramp puts them right back at the top of the channel which has prompted three previous tumbles. Will this one be any different?
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Futures have regained about 30 points after last week’s drubbing.
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Futures tanked overnight on news of Israel’s rocket attack on Iran, only to recover all their losses as we go to press. The latest retaliation is being characterized as a tit for tat.
But it’s easy to imagine the Plunge Protection Team working overtime to calm markets by hammering VIX and WTI back down from their overnight highs.
Meanwhile, SPX came within 1.89 of our 5,000 target yesterday, testing support that continues to be quite important.
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Gold and silver both came within 1% of our upside targets for them earlier this week. With inflationary pressures once again top of mind, have they exhausted their upside potential? We’ll update our long-term forecasts this morning.
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Retail sales came in roughly double the Street’s estimates at 0.7% versus consensus of 0.3-0.4%. Ex-auto was just as strong: 1.1% versus 0.5% consensus. Combined with an Empire State Manufacturing index disappointment of -14.3 versus -6.0 expected, futures sold off for all of 30 seconds or so before rebounding to higher highs.
The retail sales print, like much of the recent data, further reduces the odds of substantial rate cuts in 2024. Yet, as is often the case, the algos ignored the data and focused instead on several of their favorite factors: VIX, currencies and SPX’s bounce off its 50-day moving average.
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As we suspected, Wednesday’s lows weren’t enough to generate a sustainable bounce. We’re seeing the aftermath of that premature technical bounce this morning.
Our long held bearish position on EURUSD, for instance, is finally gathering a little momentum.
The challenge for bears remains SPX’s 50-day moving average, currently at 5105. If VIX can remain below 18.50, then we could see more meaningful support for equities. If VIX surges past that long term trend line, then the bears could finally have something to celebrate.
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Futures are up modestly as traders look ahead to this week’s important data dumps: FOMC minutes and CPI on Wednesday, initial claims and PPI on Thursday, and Friday’s U of Michigan consumer sentiment.
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Futures are off this morning as algos digest the prospect of persistently high inflation and rising interest rates.
The 20-day moving average continues to matter.
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In a repeat of the most effective algo move of the past 10+ years, VIX broke down following the Fed’s no-news rate decision and press conference yesterday.
As always, this allowed equities to leapfrog an area of stubborn overhead resistance. 
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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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