pebblewriter

Tag: VIX

  • Not a Breakout

    Yes, it was impressive. AAPL, FB, GOOGL and AMZN delivered big time. Yet, AMZN, the one that was best positioned to clean up, hasn’t yet broken above a key Fib level, let alone the top of the 20-year old channel which marked the July 13 reversal.

    If it does, fine, bears should prepare for a long, long winter. But, until it does, this remains a dangerous moment for the recovery’s poster child.

    While we’re at it, did anyone notice that after tagging yesterday’s downside target, futures bounced only to the .886 Fib?  Or, that SPX is poised to pop and drop at its own .886 Fib?

    Again, not a breakout.

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  • Thinking About…a Correction

    Will the addition of another “thinking about” keep stocks aloft until the next FOMC meeting?  Futures aren’t looking so hot, perhaps because WTI has now joined RBOB in breaking trend, 10Y yields have gapped lower, and VIX broke out of its falling wedge. The algos are not happy.

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  • A Failure to Capitulate

    Futures have given up all their Tesla gains and are pointing to a slightly lower open for the S&P this morning.Apparently, a threatened breakdown in VIX just isn’t as effective as it used to be.

    What we have here is a failure to capitulate (apologies to Cool Hand Luke for the cheap rip-off of a great movie.)

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  • Currencies: A Turning Point

    Lots going on this morning, with currencies joining VIX in leading the equity circus. EURUSD smashed its March highs and is closing in on one of two levels of overhead resistance as DXY tests an important channel bottom. The next moves for each will have important implications for the economy and for algo-driven equities.

    ES has recovered 23 points of its overnight losses after failing to hold our .886 Fib target.  It’s one vaccine headline away from recovering 3258.

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  • Shades of 2015

    SPX reached our Fibonacci .886 retracement target yesterday. It’s a level I never imagined seeing after stocks reached important support back on March 23. But, then, I never imagined $5 trillion in liquidity  – equal to the nation’s Q2 economic output according to the Atlanta Fed – being pumped into the economy in the second quarter.

    We’ve always known there would be a fundamental battle between another round of QE (remember when Powell insisted it wasn’t QE?) and the realities of the worst pandemic in over 100 years, spawning unemployment that would exceed the GFC and deaths in the hundreds of thousands if not millions. But, this market cares little about fundamentals. It cares about liquidity and a steady diet of the right signals being fed to the algos.

    Central bankers and governments have delivered on both counts – with WTI having risen $59/barrel and VIX plunging 72% and with liquidity injections purportedly intended to bolster employment which, in many cases, went into stock buybacks.

    Nevertheless, here we are. In Harmonics, the .886 Fib represents an 88.6% retracement, or rebound, of a significant drop.  It’s typically as large a rebound as you’ll see unless stocks test their former highs (a potential double top) or push past them to new highs. Unfortunately, it’s not always clear cut.

    In May 2015, SPX tumbled 12.5% after coming within 3.32 points of our 2138.04 target. By Nov 2, it had retraced 88.6% of those losses, at which point we looked for a pullback. Instead, it spent the next several sessions pushing above the .886, no doubt stopping out plenty of shorts before finally succumbing and making new lows – the 1.272 Fib extension at 1823.42.With the pandemic picking up steam – at least in the US and many lesser developed countries – the fundamental picture is looking iffy at best. The technical picture, on the other hand, is flashing plenty of warning signals. Can we count on it mattering?

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  • Frontrunning the Fed

    Ultra low interest rates don’t do much for traditional banking earnings, but they’re pretty fantastic for highly leveraged banks such as Goldman that are only too happy to front run the tsunami of Fed liquidity injections.

    Between GS and more positive vaccine news (Moderna) the futures have pushed to higher highs, settling the question as to which of the deep retracements is the ultimate upside target.  Note that the yellow channel midline served as a springboard yet again… …as did VIX’s daily drop to/through trend line support.continued for members… (more…)

  • PPI Disappoints

    The producer price index missed this morning, coming in at -0.2% versus consensus and prior read of +0.4%. Core also missed at -0.3% versus consensus of +0.1%. Although the market has certainly staged a V-shaped recovery, someone forgot to check with the economy.

    Not to worry, because Gilead was quickly out with a press release reiterating the virtues of Remdesivir. The algos like this kind of stuff, especially when faced with otherwise depressing headlines.

    More importantly, VIX took a well-timed dive to just below its 10-DMA. The algos love this kind of stuff, and suddenly futures are back in the green.

    Don’t get too excited. It won’t last.

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  • Nothing New

    Another VIX-inspired, holiday weekend ramp in the futures in the face of dismal headlines… What a shock. Not.

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  • VIX’s Important Test

    Futures are up sharply on a better than expected jobs report: up 4.8 million, and the unemployment rate dropping to 11.1%. Initial claims came in at 1.43 million, with continuing claims rising slightly to 19.3 million.

    The direction didn’t surprise anyone, but the numbers surprised most. The reopening of most of the country over the past month has produced the desired results. It remains to be seen whether the spike in coronavirus cases in half the country will put a dent in the trend.

    Back on June 12 [see: Is it Safe?], we alerted members to a development in VIX, which had recently broken out of a falling channel from March and was nearing a 10/20 cross.

    It’s tough to see on the chart above, but VIX’s SMA10 was just about to cross above its SMA20 – a bullish sign for VIX and bearish one for stocks. If VIX is hammered today, the bullish cross can be avoided. If stocks’ meltup is to resume, we could still see VIX backtest its broken white channel or the yellow trend line off the 2018 lows which is nearing the SMA200 currently at 24.89.

    As it turned out, that’s exactly what happened. After the jobs numbers this morning, VIX tumbled to tag its SMA200 and the yellow trend line from the 2018 lows. This completes a 42% drop which produced a 200-pt (6.7%) rise in SPX.The big question, of course, is whether this important support will hold.

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  • Charts I’m Watching: Jun 29, 2020

    Futures are up modestly this morning as we glide into the quarter end on a holiday-shortened, low-volume week.  VIX’s triangle perfectly illustrates the technical picture: attempts to break out have been beaten back, while threats to break down have routinely been rebuffed.

    It’s exactly what one would expect when the goal is to maintain positive numbers for the quarter – in the midst of a horrid fundamental backdrop. It’s hard not to look ahead to July, when the calendar offers less support.

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