Wednesday, 31 July 2019

Rate cut 1

US equity indexes closed on a broadly weak note, sp -32pts (1.1%) at 2980. Nasdaq comp' -1.2%. Dow -1.2%. The two leaders - Trans/R2K, settled -0.8% and -0.7% respectively.

sp'daily5



VIX'daily3



Summary

US equities opened in minor chop mode, and naturally remained that way into the 2pm Fed announcement.

The Chicago PMI 44.4, vs 50.5est. As June printed 49.7, the July reading is a SECOND consecutive monthly print under the key recessionary threshold of 50.0. This merits alarm bells, and its difficult to see how August might rebound >50. Eyes on related PMI and ISM manu' and serv' sector data across the next month or two.
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As expected, the fed cut rates by -25bps to 2.00/2.25%, with QT being concluded two months earlier than originally planned.


Powell tried to dance the fine line, claiming that the US economy remains favourable, but that monetary policy needs to be eased. The market was upset at the notion that it might be a 'one and done' cut, with the SPX imploding to 2958, before rebounding.

Volatility spiked, with the VIX printing 16.55, and settling +15.6% to 16.12.
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In AH, Trump shared his view on Powell and the Fed...


I expect Powell to be eventually replaced by Bullard, who will be more than happy to cut rates to negative, spin up the printers, and start buying T-bonds, but eventually... corp' bonds, student debt, infrastructure/build-America bonds, and ETFs/stocks.
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Fed rates with SPX


Behold! ... as I've added a new red dashed vertical red line.
*the actual interest rate will not update on that chart until August, as its an 'eom' (end of month) chart.
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Darkening skies over London
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Tuesday, 30 July 2019

Here come the rate cuts

US equity indexes closed somewhat mixed, sp -7pts (0.3%) at 3013. Nasdaq comp' -0.2%. Dow -0.1% The two leaders - Trans/R2K, settled +0.1% and +1.1% respectively.

sp'daily5



VIX'daily3



Summary

US equities opened on a moderately weak note, pressured by a number of things, not least some trade/tariff/fed chatter from Trump....


It does appear clear that Trump recognises the fed will only cut by -25bps tomorrow. The US President again noted his view that the fed should not have done QT. It is likely that QT will be ended two months early tomorrow.

The afternoon saw a lot of minor equity chop, still leaning on the weaker side. Volatility picked up, with the VIX settling +8.6% to 13.94.  


Here come the rate cuts

Wednesday will see rate cut'1, along with a probable early end to QT.

Fed rates with SPX


Tomorrow I'll add another red dashed vertical line to the above chart. That is no small matter.
I'm aware some believe it will be a 'one and done' situation, or just 2 or 3 cuts by early 2020.

Regardless, if you think rate cuts are an inherently 'good sign' for the US/global economy, I got some -10% yield Permabear corp' bonds I can sell you. You can pay me the negative yield via Paypal or Square, I really don't mind which.

yours... all payments in USD, as I sure as hell don't want anything in GBP, a currency that continues to depreciate.
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Not the best of summer days
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Monday, 29 July 2019

Further Presidential fed bashing

US equity indexes closed a little mixed, sp -4.9pts (0.2%) at 3020. Nasdaq comp -0.4%. The two leaders - Trans/R2K, settled u/c and -0.6% respectively. Near term outlook offers moderate chop ahead of the fed.

sp'daily5



VIX'daily3



Summary

US equities began the week on a pretty subdued note, with opening chop, leaning on the slightly weaker side. Trump was active before the opening bell...


... with a double tweet follow up...


It would seem Trump is aware the fed will cut rates by -25bps this Wednesday, rather than -50bps.

Volatility remained broadly subdued, with the VIX settling +5.5% at 12.83. The s/t outlook favours moderate equity chop ahead of the Wed' 2pm announcement from the Fed. From there... things should get real interesting.
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A Korean giant ascending from the land of BREXIT chaos...

..as the GBP continues to depreciate towards parity with the USD.

A fine summer's evening
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Saturday, 27 July 2019

Weekend update - US equity indexes

It was a bullish week for US equity indexes, with net weekly gains ranging from +2.3% (Nasdaq comp'), +2.0% (R2K), +1.6% (SPX, Trans), +0.9% (NYSE comp'), to +0.1% (Dow).


Lets take our regular look at six of the main US indexes

sp'500


The SPX broke a new historic high of 3027, net higher for the week by 49pts (1.6%) to 3025. Weekly price momentum is on the moderately high side. Despite new highs in price, we still have massive technical divergences that stretch back to Jan'2018. M/t rising trend offers first support in the 2870s into end July/early August.


Nasdaq comp'


The Nasdaq comp' broke a new historic high of 8339, settling net higher by 183pts (2.3%) to 8330.


Dow


The mighty Dow settled +38pts (0.1%) to 27192. Cyclically on the high side. M/t rising trend offers first big support in the 25700s.


NYSE comp'


The master index settled +123pts (0.9%) to 13235. Note the Jan'2018 high of 13637, which I'd imagine the Gundlach is closely watching. 


R2K


The R2K settled +31pts (2.0%) to 1578. Things turn very bullish >1618, which would offer a challenge of the Aug'2018 high of 1742.


Trans


The 'old leader' - Transports settled +172pts (1.6%) to 10776. Weekly price momentum continues to tick upward. Note the April high of 11148.



Summary

All six of the US equity indexes saw net weekly gains.

The Nasdaq comp' and R2K lead the way higher, whilst the Dow was lagging.

The SPX and Nasdaq comp' broke new historic highs.

YTD price performance:


The Nasdaq comp' continues to lead the way, currently net higher for the year by 25.5%. The SPX is +20.7%, the Trans +17.5%, and the R2K +17.1%. The Dow is +16.6%, with the NYSE comp' lagging at 16.4%.
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Looking ahead

An exceptionally busy week is ahead, with another truck load of earnings, and rate cut'1 from the Fed.

Earnings:

M - BYND, AKS, NXP, RIG

T - MA, PG, MRK, SIRI, PFE, SNE, COP, UAA, LLY, AMD, AAPL, EA, GILD, GRUB, FEYE, AMGN

W - GE, AMRN, SPOT, ADP, QCOM, LRCX, WDC, ZNGA, FIT, OXY
T - SHOP, VZ, GM, ABMD, YETI, OLED, SQ, X, PIN, FSLR, ETSY
F - XOM, CVX, STX, NWL, ARNC

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Econ-data:

M -
T - Pers' income/outlays, Case-Shiller HPI, consumer con', Pending home sales
W - ADP jobs, Chicago PMI, EIA Pet' report.

*FOMC announcement (2pm). This will likely detail a rate cut of -25bps to 2.00/2.25%. Its almost equally probable the end of QT will be brought forward from end Sept' to end July. Powell will host a press conf' at 2.30pm, and that will drag on for around an hour.

T - Weekly jobs, PMI/ISM manu', construction
F - Monthly jobs, intl' trade, consumer sent', factory orders
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Friday, 26 July 2019

Severe monetary tightening, seriously?

US equity indexes closed broadly higher, sp +22pts (0.7%) at 3025.  Nasdaq comp' +1.1%. Dow +0.2%. The two leaders - Trans/R2K, settled +0.8% and +1.2% respectively.

sp'daily5



VIX'daily3



Summary

US equities opened on a positive note, as Q2 GDP data came in within what is arguably the 'Goldilocks' zone. The US President didn't miss the opportunity to take a mild swipe at the Fed...


It will be interesting to see how Trump reacts to rate cut'1 next Wednesday afternoon. I'd imagine he'll say something like 'its a start... but rates are still too high!'.

The Kudlow made an appearance...



It was truly bizarre to see Kudlow deem fed action since Trump's election as being 'severe monetary tightening'. Seriously? Rates have only been raised to 2.25/2.50%, with a reduction in the balance sheet of $657bn (as of July 25th 2019).

These are indeed crazy times, where most have lost any degree of perspective. I don't think Larry knows he has been in the twilight zone for quite some years.

The afternoon saw equities lean upward, with the SPX and Nasdaq comp' both breaking new historic highs. Volatility remained subdued, with the VIX settling -4.5% at 12.16.

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Thursday, 25 July 2019

A bearish Thursday

US equity indexes closed broadly weak, sp -15pts (0.5%) at 3003. Nasdaq comp' -1.0%. Dow -0.5%. The two leaders - Trans/R2K, settled -0.8% and -1.2% respectively.

sp'daily5



VIX'daily3



Summary

US equities were a little higher in pre-market, but just 5/10mins before the open... things turned red, and thus began a rather bearish Thursday. The afternoon saw some minor chop, but still settling on a weak note.

Volatility picked up, although the VIX remains at unusually subdued levels, settling +5.5% at 12.74. Friday is going to be real interesting, as its arguably a classic case of whether 'good news is bad news'.

Meanwhile...


It was kooky in early morning to see the CNBC scale for German bond yields doesn't go below 0.00%. We are very much living within the twilight zone. As things are, it'd seem the ECB will cut rates in September, institute some kind of 'tiered rates', and eventually... spool up the printers.
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Sunset between the storms
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Wednesday, 24 July 2019

Tears in Rain

 US equity indexes closed broadly higher, sp +14pts (0.5%) at 3019. Nasdaq comp' +0.8%. Dow -0.3%.  The two leaders - Trans/R2K, settled +0.5% and +1.6% respectively.

sp'daily5



VIX'daily3



Summary

US equities opened moderately weak, but there was an early reversal, with the SPX and Nasdaq comp' breaking new historic highs in the closing hour.

Volatility remained in melt mode, with the VIX settling -4.3% at 12.07. S/t equity price structure is an ascending wedge, and leans to s/t cooling. Tomorrow is Thursday, which inherently leans to the bears. With the ECB in early morning, and further earnings, it should be enough to keep most awake!
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Meanwhile...


Whilst many are focused on the very s/t, JPM's Michele is boldly touting the US 10yr yield to drop to 0.0% percent 'within a few years'. I have to agree with that.
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Blade Runner is a personal favourite...



Hauer was a superb actor. He did a man's job. Finished. 
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Tuesday, 23 July 2019

Tuesday gains

US equity indexes closed moderately higher,  sp +20pts (0.7%) at 3005. Nasdaq comp' +0.6%. The two leaders - Trans/R2K, settled +0.9% and +0.6% respectively. Near term outlook offers another rollover, with natural target of 2971/41.

sp'daily5



VIX'daily3



Summary

US equities opened moderately higher, but price action was choppy. There was a secondary wave higher into the late afternoon. Volatility remains broadly subdued, with the VIX settling -6.8% at 12.61. I do not expect the recent historic high of 3017 to be broken above before rate cut'1. Instead, I'd look for a cooling wave to 2971/41.

Rate cut views


First, its notable that only a collective 24% expect 3 or 4 rate cuts before year end. Second, almost a quarter expect rates to be held next Wednesday.

Yours truly holds to a July 31st rate cut of -25bps to 2.00/2.25%, with a probable early end to the QT program. I expect 3 or 4 rate cuts before year end, and that doesn't even assume any recessionary econ-data.
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Koreans departing London

Even some English are making an escape

... as its just another day on the London streets
New PM Boris Johnson, along with London Major Khan have a mission impossible challenge. Maybe they'll also just fly away to a far better place? 
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Goodnight from London
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