Wen bottom?

2 ago 2022

IMHO - bottom is not there yet. (Thread to be continued.)

4 ago 2022

Nota

Short-Term:
* Expect the rally on S&P 500 to continue until mid-late August (4200-4300 is the key area to overcome - I expect most investors will go short in this area again). VVIX (Volatility of VIX) is very low - expecting volatility to rise later this month - probably bad for BTC (Low volatility on the other hand is typically good).
* CPI July on August 10th: Probably a little better than expected. Should also establish continued support for the rally - don't expect it to last.

4 ago 2022

Nota

BTC vs. VIX

9 ago 2022

Nota

CPI tomorrow: Inflation Rate YoY forecast 8.7%-9%. Note how the WH did not front-run the CPI data release this time (so far) like in the previous two readings.

10 ago 2022

Nota

*US Jul Consumer Prices Unchanged; Consensus +0.2%

*US Jul CPI Ex-Food & Energy +0.3%; Consensus +0.5%

*US Jul Consumer Prices Increase 8.5% From Year Earlier; Core CPI Up 5.9% Over Year

11 ago 2022

Nota

As of writing we are at +50% (4,227) from the low. Will be interesting, if we can get a daily close or even weekly above.

PPI in a couple of minutes. Don't know if we will sure additional easing here as well.

Next week: opex (Options Expiration) could see assets go lower.

19 ago 2022

Nota

Next week: Federal Reserve Symposium in Jackson Hole
Friday, August 28th: Powell speech on "Economic Outlook"

There is potential for a short-squeeze early next week. My plan (not advice) is to add more shorts, if we go back above 4,300.

17 set 2022

Nota

Some ideas until EoY 2022:

FOMC September 20-21th:
75bps+ hike already priced in. Anything less would be a surprise and loss in credibility. 100 bps hike in the cards - although this hasn't happened since Volcker and would put a question mark in confidence of the FED in it's own forecasts, yet Powell said that the FED would look at the data going forward.

Data: Employment is still strong. CPI at 8.3% (was 0.2% lower than expected). Inflation still strong. Composition has changed: Gasoline lower, food and rents up. Expected, as gasoline prices front-run food prices. Yet, the bulk of the food price increases only happened started September, which wasn't reflected in the CPI data yet.

Next CPIs until December : Expecting gasoline to gradually return higher. Seasonality and "Deferred Demand" being the main driver. Most people did hold of filling their depots for winter because of the high prices and were looking for lower entries. Time is ticking and winter is coming. No time to defer anymore. OPEC said that the current price doesn't reflect the demand and is considering lowering production. Add to this mix the proposed EU price-caps on Russian oil, seizure of Russian oil companies and the Russian-Ukrainian war that will most likely not end this year - gasoline prices might come back strong and this will of course reflect back into food prices by Christmas/winter.

November: U.S. mid-term elections. Earlier this year I would have said the outcome is going to be clear. Now I'm not so certain anymore - and I don't think the markets will like the prospect of this uncertainty in early/mid October, where I expected fresh lows on the S&P 500.

Christmas/Winter: Most households will have burned through their savings by Christmas. FedEx warning and revoking forward guidance is the first sign of a consumer recession that will hit by Christmas. Retail will feel the "pain" that Powell talked about.

Looking at the bigger picture, there is so much systemic risk all over the globe that makes it really impossible to say this isn't going to get any worse than what is already in cards:
China/Taiwan, CoVid-19, Cold winter in Europe (or cyberattacks on critical infrastructure), potentially leading to blackouts, potentially leading to civil unrest, Russia/Ukraine is far from done, Dollar strength - EMs are in turmoil and this is just some of the risk until EoY. Next year: Annual earning reports is going to be brutal, high potential for global recession, EU Crisis, civil unrest ... and the tails that follow.

22 set 2022

Nota

Thoughts on FED rate decision September 21st:

FED raised interest rates as expected to 75bps, but also did give forward guidance (+125bps until EoY with two scheduled FOMC meetings outstanding), expecting 4.25%-4.5% by end of 2022 and 4.5%-5% by end of end of 2023. Mr. Powell reiterated their long-term goal to get inflation down to 2%, referencing again the Volcker/Burns-Era and the speech at the Jackson Hole Symposium end of August 2022.

There is no example in history where inflation above 5% (CPI currently above 8%) did come down without a recession and without FED raising interest rates above the inflation rate. Of course, this might get violated this time, as historical data has no predictive power - with U.S. debt being where it is in 2022. Inflation was also mostly isolated to specific countries, whereas today it is global - with pretty much all central banks raising rates, inflation getting exported and dollar strength being a global wrecking-ball.

On the other hand, inflation also did not just come down because of monetary policies. Sure, Volcker did what needed to be done, but it was also the fiscal policies of the early 80's (de-regulation of oil-industries, tax cuts, breaking the unions) in the Reagan-Era that led to investments, work and recovery from inflation.

I don't see any government in the EU or the US doing this right now, if anything, it's quite contrary.

4 ott 2022

Nota

Update October 4th:

S&P500 did hit 1W200MA and a new yearly low in the last week of September 2022 with VIX>31.
The low at the end of the of quarter marked the third quarter in a row (Q1-Q3) with a negative return.

S&P500 has bounced back ~+6% so far and VIX dropped below 30 again, 10Y/2Y bonds dropping also - without any signs of capitulation for a true bottom.
Market expecting FED pivot, which in my opinion is highly unlikely for this year, given still persistent inflation and the outlook of OPEC+ announcing a deep cut.

I'm expecting to see more cash outflows here for the rest of the 4th quarter.
First, investors in mid-October, followed by retail after mid-November.
As cash leaves the market, volatility will pick up again (in both sides - be careful).

A breach of the 1W200MA with conviction will result in much more downside. For a sustained move up, we neeed to reclaim 4250.

6 nov 2022

Nota

Update November 6th, 2022:

Thoughts on mid-term election Impact:
Red Win = Monetary & Fiscal: "Tighter for longer", yield curve inflates further
Blue Win = Looser Fiscal, making Monetary policy "impotent", yield curve steeper

FOMC:
.50 most likely, .75 is also still on the table

Fed Pivot: Only when Recession + (Credit) event or external shock = Not yet, risk is significant

VIX falls = Crypto rises, until after elections, mid-November is coming (HF redemptions)

19 dic 2022

Nota

Are we(U.S.) in a recession yet?

1. US10Y-US02Y inverted to levels last seen in 1981 - now steeping, but far from neutral ✅
2. Oil down 40% in 6 months ✅
3. Bank stocks declined 10% in 4 days last week ✅
4. ISM manufacturing index falls three months straight ✅
5. US home sales index is down +35% YoY ✅
6. Interest rates higher - higher than US02Y for the first time in history ✅
7. Technical recession since Q2, but GDP pulled out in Q3 ❌
8. Low unemployment ❌
9. Wages rising ❌
10. Gold down -13% from March peak (was down -20% into bear territory, but rebounded) ?

9 gen 2023

Nota

Left to Right:
S&P500 - Down 18.35% YoY
Nasdaq 100 - Down 33% YoY
German DAX 40 - Down 9.61% YoY

Nasdaq is looking the weakest right now, S&P 500 in the mid of trading range and DAX is looking strongest - repeat "strongest".
It's interesting to see how this turned around and is now only 9.61% away from it's previous all-time high, when everyone was calling doom. Sure, mild winter weather, subsidies in various forms and quick turn-around from russian gas dependence did help - but the impact was only 9.61% while inflation YoY is still at 8.6% (so nominal -18.2%).

What to expect in the next weeks of January 2023:
- CPI should further drive the peak inflation mood - how much of this is already priced in?
- Earning Session: From inflation to recession shock - which will probably hit tech first (Watch AAPL, Jan. 26th) - again, how much of this is already priced in? I don't think much. Expecting more sideways before earning session kicks-off in the third week of Jan'22.
- Employment: Still big Question - is this really coming down? Most EU countries just reported "peak" employment => FED, ECB: Higher for longer

12 gen 2023

Nota

Initial Jobless Claims & CPI out in about an hour.
* Last PPI was hotter than expected, typically rolls over into next CPIs
* Brent Crude Oil rebounded from $77 to $83 at the end of December
* RoW, particularly EU, had lower than expected CPI prints (mostly from energy) - how much of this because of subsidise (e.g. Germany), TBC
* Est. CPI consensus is 6.5%, down 0.6% from previous CPI at 7.1%
* Biden to address press on inflation after release … victory lap? However, has done this before on hotter and on cooler prints

17 feb 2023

Nota

Update in 3 Charts:
DXY


GOLD


US10Y


Looks like regime about to change again. "No landing" => FED can't claim mission accomplished, increases probability of a "hard landing" later (23-24)

When US10Y goes and stay above >4%, trouble for homebuilders => trouble for banks

10 mar 2023

Nota

As someone clever once said, usually it is not a good sign if the price bar touches the volume bar.



S&P 500:
At Volume POC, at 1D200MA, back to trend-channel - decision point.

13 mar 2023

Nota

S&P 500: Below POC, Below 1D200MA and (almost) back in downward trend-channel.

It's quite fair to say something significant did break over the last week (SVB, SI, SBNY - closed by FDCI: "systemic risk"). Watch asian banks/insurances.



Steepening quite bullish, considering it's just the beginning of the week.

CPI due March 15th, 2023. FOMC next week: Will they pivot? Expecations range from .5 to .25 to no hikes. FED is in a pickle. No hike: Let inflation soar back. Hike: SVB is most likely just the tip of the iceberg. Note: Historically bottom only was in after the FED had already cut. Watch for chops.

13 mar 2023

Nota

US02Y below FEDFUNDS