pebblewriter

Wild Ride Ahead?

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Today is setting up as a potentially wild ride, with plenty of earnings, employment, oil inventory and sentiment data to digest…on top of a FOMC rate announcement that could surprise in its hawkishness.

SPX came within 5 points of our next downside target yesterday before VIX began its daily plunge — this time a 10.8% crush after coming within a smidge of our 13.01 target. 2017-02-01 VIX 5 0615 VIX’s plunge continued overnight and, along with USDJPY’s bounce off our downside target and CL’s usual ramp job has levitated the futures just ahead of the open.2017-02-01 USDJPY 60 0600continued for members…

Yesterday’s ramp in CL was undone — after the close, of course — by a huge API inventory build.  But, it was ramped right back up early this morning to support the futures.  2017-02-01 CL 5 0639If today’s EIA report confirms at 10:30 AM, we could see some weakness come in.2017-02-01 CL 60 0600For now, ES is backtesting a TL that could matter.  And, SPX is back above that .618, so the presumption is that it will leapfrog its SMA10 and break out rather than down on the (now) 7.75 ramp job in ES.

If the Fed takes the inflation warning signs seriously, they could surprise with a rate hike.  It would be unusual, given that there is no press conference attached.  And Yellen has HH testimony on Feb 15th (same day that inflation figures come out.)

2017-02-01 ES 60 0600 2017-02-01 SPX 5 0600A look at the data so far, and that to come…  Spending has outpaced income gains, which means consumers are stretching in the face of (because of) inflation.  It’s reflected in the PMI and consumer confidence numbers, which both undershot.  ADP employment was a beat, however, which is more fuel for the rate hike fire.Screen Shot 2017-02-01 at 6.31.20 AMSPX has a gap to fill at 2291.66, which could serve as a magnet to the upside.  Otherwise, I’ll be watching to see if the ramp fades once the oil data comes out and/or the FOMC delivers a less than dovish announcement.

UPDATE:  9:58 AM

I’m hitting the road to return home this morning.  As far as key levels, today, I’d let the SMA10 be your guide.  I suspect SPX has already topped out for the day and would be comfortable opening a short position here at 2285.55.  But, I wouldn’t get too excited about it until SPX drops through the SMA10 at 2280.17.  If the EIA report and the FOMC were both to cooperate, we could get some serious downside. 

But, watch your stops, as there are no guarantees.  I’ve been surprised by CL’s resilience in the face of consistently negative inventory figures and news — probably a function of the upcoming Aramco deal as much as a desire to prop up stocks in general.2017-02-01 SPX 5 06582017-02-01 CL 60 07002017-02-01 VIX 5 0709 2017-02-01 USDJPY 60 0700I hope to have a chance to post again just before the close.  GLTA.

 

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