We Need the Eggs

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There’s an old joke retold by Woody Allen in the movie Annie Hall:

“A guy walks into a psychiatrist’s office and says, hey doc, my brother’s crazy! He thinks he’s a chicken. Then the doc says, why don’t you turn him in? Then the guy says, I would but I need the eggs.”

Isn’t that the essence of the market we’re in? The US has $28 trillion of debt and much more on the way. The Fed’s balance sheet stands around $7.8 trillion. Stocks are trading at silly multiples. The bond market, the last bastion of truthiness regarding the economy has gone mute in spite of spiking inflation.

We know that all of these things are a special kind of crazy that has never ended well in the past. But, the economy is counting on this go-for-broke craziness to give the appearance of normality and, if we’re lucky, pump out a little wealth effect to the 99.999% without yachts – hopefully enough to offset inflation.

We go along with it because we need the eggs.

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Futures are almost back to green, regaining 26 points of their overnight lows on the latest failure of VIX to hold its 200-DMA – the 8th cross in the past 8 sessions – and its subsequent 20% beatdown.

While this morning’s economic data continues to disappoint (Phil Fed 31.5 vs 42 est.) markets are heartened by the prospect of continuing Fed intervention.

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The big picture shows we have a long way to go before even reaching the bottom of the rising purple channel. SPX’s gap will close at 4125.99.

The S&P 500 hasn’t closed below its SMA50 since Mar 4. It bounced back above it the very next day and has remained above it ever since. We’ll see if yesterday’s test holds. VIX’s latest antics… Its gap will close at 21.45.

USDJPY is showing some weakness as ES erases its overnight losses, suggesting that this is a pause in stocks’ decline rather than the end of the decline. Gold and silver are holding up reasonably well after backtesting former resistance. Remember, there’s a nice correlation between GC and ZN – 10Y note futures – which, like GC, are still in a small rising channel since late March.TNX, on the other hand, hasn’t declined at all. It continues to go sideways, and is seemingly on hold until oil prices decline. Speaking of oil prices, we’re getting some progress.

RB too, but not as much action.

NKD, which had a very clean shot at its SMA200 when it crossed the 1.272 Fib, is going sideways – likely a pause to wait out the shorts, but in another week or so the SMA200 will be higher than NKD’s recent lows. The BoJ really can’t help themselves…

Like SPX, DJI tested its SMA50 yesterday……the first time in a while. It has a gap to fill at 34,044.

Last, BTC has pushed back above its SMA200 and 2.24 Fib at 40,180, so technically stopping out shorts. My sense is that this push is a headfake which won’t last, but cautious traders should only be short below the SMA200 and Fib. If it holds, the upside is to the 2.618 Fib at 46,433.