pebblewriter

Tag: VIX

  • Yellen Goofs, Tells the Truth

    Two quotes by Janet Yellen, only hours apart.  The first clearly emphasizes the very real risk of rapidly rising inflation…

    “It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy.”

    …while the other clearly walks back the earlier assertion.

    “I don’t think there’s going to be an inflationary problem. But if there is, the Fed will be counted on to address them.”

    The reason for the second comment, of course, was the market’s reaction to the first – a tantrum, if you will.

    Most of us remember when, in 2013, Bernanke spooked the markets with talk of a rollback in bond purchases. Yellen did the same thing a few years later as Fed chair. This one is slightly different, as it highlights the facts which, by now, should be clear to everyone: inflation is a very real danger to the economy and the markets.

    Yellen’s retraction won’t change that.

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  • Still Not Transitory

    At some point – perhaps after six months of hot inflation data – the Fed will be forced to admit that inflation pressure are not transitory. This morning we saw evidence that March personal incomes spiked by 21.1%, the most since 1946. Personal spending for the month shot up 4.2%, the most since last June. And, PCE’s 2.3% is the biggest since 2018.

    S&P futures are calling BS on the whole modest/transitory inflation story – off over 20 points so far.

    And, VIX’s bullish (bearish for stocks) 10/20 cross hasn’t gone away.

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  • Not Transitory, Not Even Close

    If gasoline prices remain where they are or continue to rise, Powell will be just plain wrong about inflation being transitory. This is what to expect if gas prices were to flatline at this level through December. Unless most of the other components of inflation were to nosedive, CPI will remain well above 2% for the remainder of the year.

    Persistent enough for you, Mr. Powell?

    But it doesn’t matter. At least not yet. Although the (flawed) CPI data is more relevant to almost everybody, the Fed focuses on PCE, which mutes the reported inflation even more than CPI.  March PCE is due out tomorrow, and should continue not to alarm anyone.

    In addition, the blowout 3%+ April CPI won’t be reported until May 12. The Fed might roll the dice and leave prices where they are, hoping that they can control the fallout from truly alarming numbers.

    Or, we could see some preventative price action in the futures starting as soon as Sunday. The third option, of course, is the good old “miscalculation” of oil/gas prices, resulting in a CPI print that’s not so scary. They’ve done it plenty of times before.

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  • What Inflation?

    The Case-Shiller Home Price index rose 12% YoY – the fastest pace since February 2006 – meaning even fewer Americans have a shot at purchasing or renting a house. Ironically, the burden falls mostly on the low-income families that the Fed claims to be most concerned about. Thank goodness we don’t have an inflation problem.

    In unrelated news (not), futures notched a new all-time high overnight and have essentially busted the little H&S Pattern that might have resulted in a massive (sarc) 1.8% selloff.

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  • Update on Oil & Gas: Apr 26, 2021

    March durable goods orders disappointed this morning, coming in at 0.5% versus the 2.3% rebound expected after February’s -1.2% flop.

    We couldn’t help wonder whether the data were somehow related to the first (tiny) breakdown in RBOB prices since the Mar 23 lows.

    Given that oil and gas are poised to deliver a huge increase in CPI for April, this might be a good time to review where we are and where we’re headed.

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  • Charts I’m Watching: Apr 21, 2021

    Futures are backtesting the 10-day SMA this morning in the wake of the first two day decline since March.

    Look for more to come.

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  • Moment of Truth: 2021 Edition

    With various indices reaching or nearing important overhead resistance, today is shaping up as a moment of truth for a market which has delighted in head fakes.continued for members… (more…)

  • Last Call

    Despite a few tense moments midday, ES held the TL of support from last Wednesday and has rebounded to within 7.50 points of the important Fibonacci extension and channel top at 4153.62.Will the substantial overhead resistance at these levels matter this time? We’ll know very, very soon.

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  • CPI’s Head Fake

    This CPI data is significant in that it shot up over 2% – the highest since 2018 when the prints of 2.95% (July) and 2.70% (Aug) sent the 10Y up to 3.25%. But, it’s the inflation happening right now, which will be reported next month, that the Fed is worried about.

    As we’ve anticipated, March’s 2.6% YoY print was largely the result of a large (22%, should be 28%) increase in gas prices. Though clearly non-transitory food, utilities, used cars and medical services all played an important role. The data next month, however, will put this to shame. As things stand now, April 2021’s gasoline prices (2.77) are up a whopping 60% over 2020 prices.

    As we’ve discussed many times, this should put CPI at over 3% – perhaps closer to 4%.

    The Fed seems to be betting that it can divert attention from the coming data. And, maybe they can, as bond prices seem to be immune to this data and the recent blowout PPI.

    But, it remains to be seen whether the usual algo tricks will be able to handle a CPI print of over 3%.

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  • Charts I’m Watching: Apr 12, 2021

    Futures are off slightly on a low volume Monday following what should have been a bigger reaction to the latest PPI data that was off the charts.

    Either bond traders all took Friday off, or it would appear that the Fed has taken “supporting” the markets to new heights.

    Markets will have another chance to react this morning…unless, of course, VIX futures fail to react to the obvious support.continued for members… (more…)