Wednesday, 13 December 2017

A third rate hike

As expected, the Fed raised rates for a third time this year, +25bps to a new target range of 1.25-1.50%. Yellen is now fading into the sunset, and a grander issue is that it will be on Powell's watch, that things start to break.


WTIC, daily

Yellen's last major press conf. Note the 10yr for historical purposes!


sp: today was just another day for the equity bulls, as the sp' broke a new historic high of 2671, a mere 12pts shy of my original year end target of 2683. Pretty incredible. The 3K threshold seems a given.. whether in late spring... or the summer. Things will get real 'tricky' around 2950/3047. The latter number should be recognised by some out there in fibonacci land.

WTIC: despite bullish inventory data, oil had a tough day, settling -0.9% at $56.60, settling on rising trend that extends back to late August. A break wouldn't necessarily be super bearish, as the m/t trend is currently bullish. Only bearish if <54s. Soft technical upside target are the 61/62s by early spring.

Looking ahead

Thursday will see the usual weekly jobs, retail sales, import/export prices, and busin' invent'

Normal service to resume

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Goodnight from London

*the next post on this page will appear Thursday, around 6pm EST.

VIX and Index update

US equity indexes closed a little mixed, sp -1pt at 2662. The two leaders - Trans/R2K, settled +0.3% and +0.5% respectively. VIX settled +2.6% at 10.18. Near term outlook still threatens a brief washout to the sp'2646/36 gap zone, before powering back upward into the 2680/700 zone.




sp: a new historic high of 2671, but settling fractionally lower, as cyclically, the market is s/t tired. A mini washout to the 2646/36 gap zone is possible, before swinging strongly back upward into the Christmas break. M/t... the sp'3K threshold is very much due by mid 2018.. something the mainstream are still not expecting.
Dow: a new historic high of 24666.02, settling higher for a fifth day, +0.3% at 24585. The 25K threshold is clearly due.. whether just before year end, or in early January.


The VIX remained subdued for much of the day, as the sp'500 broke a new historic high. However, with late afternoon (if only minor) cooling, the VIX clawed upward, settling +2.6% at 10.18. Near term offers a burst to the 11/12s - with sp'2640/30s. The key 20 threshold looks out of range for a very considerable time.

Looking ahead by 6pm EST

Closing Brief

US equity indexes closed a little mixed, sp -1pt at 2662. The two leaders - Trans/R2K, settled +0.3% and +0.5% respectively. Near term outlook still threatens a brief washout to the sp'2646/36 gap zone, before powering back upward into the 2680/700 zone.



 closing hour action: a little choppy, leaning weak, and turning fractionally negative.

... and that concludes Wednesday, as rates were hiked for a third time this year, as expected.

It was a day for the equity bulls, as we did break a pair of new index historic highs in the Dow and sp'500.

Notable options. >120000 of the Dec'22nd SPY $270 calls.. effectively 'seeking' sp'2700 ahead of the 3 day Christmas holiday break. Its a bold trade (costing around $2.3 million), but the m/t trend is clearly supportive of it.

Ohh, and we now have just 11 trading days left of the year. Tax loss selling in some stocks (such as GE) will likely be an issue. Broadly though, most recognise the sp'2700s and Dow 25k are on the menu.

This wasn't enough to merit going out today... not least on a fed day!

Have a good evening

more later on the VIX and Indexes by 6pm EST

3pm update - the Yellen continues

As Yellen continues to answer questions, US equity indexes remain moderately higher, but the bulls haven't yet been able to break a new intraday high. VIX remains in the upper 9s, but a sporadic burst to the 11/12s remains due. Metals are broadly higher, Gold +$9, Silver +2.0%, with Copper +3 cents to $3.06. Oil is -1.0% in the $56s.




As Yellen continues to utter the occasional 'transitory' and 'when conditions merit', the US market is choppy. Cyclically, the micro 5/15min cycles are both on the high side, and the market will be inclined to cool into the close. Thursday has typically favoured the bears, so tomorrow should be interesting!

notable stock: MU, daily

There is s/t threat of a test of the $40.00 threshold. Keep in mind, earnings are due next Tuesday, and there will be a great many buyers on every little down wave. I'm m/t bullish of course... way beyond $50, which is a valid target before year end.

notable strength, miners, GDX, daily

Gold saw a jump on the rate hike, but s/t, it was cyclically oversold anyway. The trend into year end still looks rather ugly. For GDX... huge multiple aspects of resistance in the mid/upper $22s.

strength, CAT, daily

Underlying super strength, and trading at new historic highs. The 225/50 zone is on the menu within 12-18mths, not least if copper (a good indirect indicator) is near the $4s.

back at 3.30pm for a micro update...

3.30pm... Most indexes are set to close a little higher. The micro 5/15min cycles do favour the bears into the close, and more so... tomorrow. At best, 2646/36 gap zone... before pushing into the 2680s, whether just before... or after Santa delivers.

notable weakness, X, daily

US Steel is set for a second net daily decline, but is broadly strong.. after a recent break >31. 

strength... BABA, daily

... Broadly chop-consolidation.... bullish way >200.

back at the close!

2pm update - time for a rate hike

A press release is due from Print HQ at 2pm, which will detail a 25bps hike in rates, to a new target range of 1.25-1.50%. This will make for the third hike of 2018, and the 4th of the past 13 months. Yours truly was seeking 3 hikes this year, although I was off on the exact timing.



First, keep in mind the initial reaction is often not what the trend will be into the close. In many ways, the bears should perhaps hope for a brief spike upward, before a reversal.

In any case, lets just see what is in the press release....

back at 2.10pm in THIS post.

2.10pm... As expected, rates hiked.

Naturally Kashkari was against a hike, joined by Evans.

Equities, initial jump...with VIX cooling. Ironically, thats not good for the bulls.



*Metals are seeing minor swings, Gold currently +$6, with Silver +1.5%, the latter of which Gundlach was touting on the lunchtime show.

back at 2.30pm....

2.30pm... notable weakness, BAC, daily

A 'sell the news' event. Cyclically high, a test of the 10dma would not be a surprise. Broadly though, the psy' $30 is appears due before year end.

notable strength, FCX, daily

... as copper +3cents to $3.05. Sister stocks SCCO and TECK are similarly strong today.

Cyclically, the setup favours equity bears to 2650/46, whether into the close, or tomorrow. Eyes on the VIX, a push into the 10s is due.

Time for Yellen, back at 3pm.

1pm update - oil and energy

US equities remain a little choppy, ahead of the fed. Meanwhile, WTIC is currently -0.6% in the $56s. The energy sector ETF of XLE is currently net higher for the week by +0.3% in the $69.50s.

USO daily

XLE weekly


*EIA report: net draw of -5.1 million barrels, which is very supportive of the bullish case into 2018.

WTIC/USO: recent price action is bullish, having recently seen the $59s. Next technical 'natural target' are the 61/62s, rather than just the psy' $60 threshold. One of the grander issues for 2018 is whether oil will broadly climb all the way into the 70/75 zone. I'm leaning on that scenario.

XLE: a key low in August, that looks very secure for mid term. The Dec'2016 looks set to be taken out in the spring. I favour PSX, APC, and LNG. More speculative: MRO, RIG, and CHK.

Equities: sp'60min

An hourly bearish MACD cross. A daily close around the lower bollinger, soon near 2650, is very possible.

notable energy stock: MRO, daily

First, note today's bullish MACD cross, along with a break above s/t declining trend. Soft target are the mid $16s. Any monthly close >19 will offer far higher levels to 29/30.

Options activity: >32000 of the Dec'29th $15.50s. Its a bullish s/t trade. 

12pm update - lunchtime chop

US equity indexes are set for two hours of micro chop, ahead of the 2pm press release from Print central. Cyclically, the setup will favour the equity bears, especially from 2.30pm onward - when Yellen will start babbling. VIX looks highly vulnerable to a sporadic burst into the 11/12s.




A new historic high of 2671.52. Regardless, price action should essentially flat line across the next two hours. As ever, the initial reaction from the fed press release is usually not the direction the market will be trending into the close.

notable stock: SWKS, Skyworks solutions, daily

Skyworks is not a company I have followed. Technically, the stock has had a really rough time since the spike high of Nov'6th in the $117s, cooling to the 97s. With an FPE in the 12s, a yield of 1.3%, and a net margin of 27.7%, this looks interesting. Needham and Drexel are both seeking >120, which isn't a stretch considering that only takes the stock back to just above Nov' levels!

notable strength, JD, daily

Stifel have issued a price target of $48, and that is helping to inspire mainstream buying today. I will note, Stifel have a lousy track record (they liked APRN and SNAP this summer). The more cautious will stick to BABA, which has proven sig' profitability.

time to check on the cheerleaders...

11am update - still clawing upward

US equity indexes are still clawing upward, lead by the Dow. Clearly, the market is assuming rates will be hiked this afternoon. However, if the tone from Yellen is interpreted as higher rates across 2018, then it'd be the excuse for a brief mini washout.




3hrs until the press release from print central. Cyclically, its a little messy, The post FOMC setup will still favour the bears. Again though, we're only talking about a possible wave to 2640/30s across a day or so. Its nothing for most to even bother with.

Ohh, and sp'2671 is just 12pts shy of my year end target.

notable strength, FCX, daily

Freeport has already pushed into the low $16s. Any monthly close >17 would offer 24/25 by summer 2018. Superior miner (at least technically) remains SCCO

notable weakness, X, daily

US Steel continues to cool after the recent powerful push above resistance of the $31s. Indeed, a natural back test to the 31s - from 34s, is underway. M/t bullish to $40.00.

notable stock, MU, daily

The gains are a little shaky. Someone is hungry for the July $65 calls, now totalling >5300. I see a >5000 block of the July $45s. Its possible someone is buying the $45s, but selling the 65s. In any case, its still a bullish trade for the m/t.
time for lunch...

10am update - opening minor gains

US equity indexes open a little higher, with fractional new historic highs in the Dow and sp'500. VIX is naturally subdued, stuck in the mid 9s. A sporadic burst to the 11/12s remains due after the fed is out of the way. The metals and oil are both churning broadly flat.




So... a pair of new historic highs, making it a day for the bulls. Price action will likely remain minor chop all the way into the 2pm announcement.

A fair few interesting trades appeared at the open...

500 Jan'2019 $3 puts in SNAP
5000 Dec'15th $116 puts in GLD... if the market interprets rates as much higher in 2018, then gold will be vulnerable this afternoon, and into year end.
10000 Dec'15 $11 calls in VALE.

... and someone is picking up Dec15'th and Dec'29th puts in XLF. Arguably, seeking a 'sell the news' event, if only for a day or so.

notable opening reversal, DIS, daily

DIS opens sig' higher, but has seen a full reversal. Disney are set to buy part of FOX tomorrow. The Marvel fans are frankly delirious, and the implications are for another truck load of characters to be merged into the 'Avengers universe'. Here is a scary thought... 40% of screened movies will be made by Disney.

notable strength, WDC, daily

With the Toshiba dispute finally resolved, this is a major weight lifted off the stock. FPE 7s, m/t bullish to $100.. which really isn't that bold. They are buying the Jan' $85 calls in early trading.

notable stock: MU, daily

Micron opened higher, but it will be highly vulnerable to cooling, not least if sp'2640/30s. Clearly though, any weakness will be a buying opp' for those bullish about earnings next Tuesday.

Interesting trade.  July'20th 2018, >1700 $65 calls... that is a long way up, but plenty of time on the clock.

Pre-Market Brief

Good morning. US equity futures are broadly flat, we're set to open at sp'2664. USD is -0.4% in the DXY 93.60s. The precious metals are still leaning weak, Gold -$3, with Silver -0.3%. WTIC is +0.6% in the $57s, ahead of the EIA report.



*awaiting CPI data (8.30am)

Yesterday saw a new historic high of 2669. S/t price momentum continues to swing back to the bears though. A  bearish MACD cross is probable this morning. Soft target would be the lower bollinger, currently at 2643. Keep in mind the gap zone of 2646/36.

If Mr Market wants to cause max confusion, it will washout to the 2630s, before resuming upward into the Christmas break and all the way into mid/late January. By then of course we'll have the sp'2700s and Dow >25k.

As its a fed day, price action will be inclined to be subdued until the 2pm announcement. A further secondary reaction is likely once the press conf' begins at 2.30pm. On balance, net daily declines are due.


early movers

AAPL -0.1%.. ongoing consolidation/chop, before the next big push upward.
ABX -0.4%, with gold
BABA +0.3%, underlying strength
DIS +1.1%, set to announce a deal with FOX this Thursday
FCX +0.3%, having cleared resistance of 15.00, next stop are the low 16s
HON -1.2%, despite raising guidance.
JD +0.7%, broadly choppy, soft target 49/50
MRO +0.5%, with oil
MS +1.2%, higher rates are bullish financials
MU +0.1%, vulnerable to $40.00 threshold, if sp'2640/30s.
NAT -21.0% (yes, TWENTY ONE), with a micro offering of $100 million.
RIG +0.7%, with oil
SQ -0.3%, choppy, still building a floor
TEVA +0.7%, s/t strong, soft target $20.00 threshold
TJX +2.5% in the $75s, upgraded by Cowen to $83 (from 79s)
TVIX -0.2%, with VIX +1.6% at 10.08
UAL +1.3%, soft target $70.
VALE -1.3%, broadly choppy, the cautious will wait to chase >12.00
WDC +4.0% in the $85s, agreeing a deal with Toshiba to settle a long running dispute.
X -0.8%, s/t weak, m/t strong to $40

overnight markets

Its a real mix out there...

Japan: -0.5% at 22758
China: +0.7% at 3303, PBOC battling to end the year on a positive note?
Germany: currently -0.1% at 13166
UK: currently u/c at 7500

Have a good Wednesday