Futures are off moderately on the first trading day after what was a torrid November. Bears might take some comfort from the overbought Dow, which has reached Fibonacci and channel resistance.
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Tag: trend lines
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The Dow’s Warning
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PCE Just High Enough
Official core PCE came in at 3.5% YoY (0.2% MoM) which was high enough to knock fuutres off their overnight highs but not enough to drive VIX above its 10-day moving average.
We pay a lot of attention to VIX as it’s perhaps the most important daily driver of algo behaviour. After poking up above its SMA10 in October for all of nine sessions, it has now spent an entire month ducking below it – stymieing any equity pullbacks…until now.
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October CPI Unchanged
October CPI came in unchanged following a 0.4% increase in September. For the year, CPI dropped to 3.2% from 3.7% in September. Core came in at 4.0% YoY and 0.2% MoM.
Futures soared on the print.
As we have anticipated for the past several months, it was a sharp drop in gas prices which produced the equity-friendly print. From CPI Continues Falling on July 12:As we discussed last month, the benefit from YoY price declines in oil/gas has maxed out unless prices continue to fall. In other words, central bankers might need to drive oil/gas prices even lower.
From June’s No Surprise:
It’s important to note that oil/gas mustn’t rally any further. If gas were to level out at current levels, the strong positive correlation between YoY gas prices and CPI indicate that inflation would be on the rise from now through the end of the year.
And, Powell: Inflation Not Over:
… there is little chance of inflation not bouncing back up unless oil and gas prices collapse from current levels.
The breakout in July following OPEC’s production cut was followed by an incredible increase in geopolitical risks related to the Israel-Hamas war. Yet oil and gas prices are lower than they have been in almost two years.
It might not be a big enough drop to help Americans forget the 6.7% annual increase in shelter expenses. But, it’s certainly enough to break stocks out of their latest swoon.
Mission accomplished.
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Charts I’m Watching: Oct 31, 2023
Futures are up slightly on as investors look ahead to tomorrow’s FOMC decision.
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Charts I’m Watching: Oct 23, 2023
Futures have dropped through our 200-day moving average target – a significant move that opens the door to a more important backtest.
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PPI Hotter Than Expected
September PPI came in at 0.5% versus 0.3% expectations, briefly driving down futures prices…until VIX was hammered back down. Its 200-day moving average continues to be the critical threshold for algos.
It remains to be seen whether tomorrow’s CPI print can also be ignored.continued for members… (more…)
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PCE Softer Than Expected
Futures added to their overnight gains following release of softer than expected August PCE (+0.4% versus 0.5%.)
It remains to be seen whether the cash market can continue to whistle past the government shutdown graveyard.continued for members… (more…)
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Charts I’m Watching: Aug 17, 2023
Futures are up modestly on stronger growth data and an approaching OPEX.
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CPI Coming Up
Futures are up moderately, primarily on the DXY stall and the usual overnight VIX smackdown. But, most attention will be focused on Thursday’s CPI print.
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AAPL & AMZN on Deck
Yesterday’s stronger than expected ADP data and the Fitch downgrade did a number on stocks, with several indicators officially turning bearish for the first time in months. But, AAPL and AMZN, which make up over 10% of the S&P 500, haven’t reported yet. So, it might be a little early for bears to get excited.
We charted AMZN last week [see: Amazon – Can It Keep Delivering?] noting that it had reached important resistance and was overdue for a reversal.
It tested important support at its 50-day moving average yesterday which, if broken, could easily usher in another 10%+ to the downside.continued for members… (more…)
