Thursday was pretty dynamic, the SPX printing 4091, recovering to 4136, but settling -1.4% to 4090. Meanwhile, WTIC settled +15cents (0.2%) to $78.74.
sp’weekly1b
WTIC daily
Summary
SPX: as things are, we’re net lower for the week by -0.05pts. The three most recent weekly candles are all somewhat spiky on the upper side… indicative of bullish exhaustion.
Bulls could argue structure is a multi-week bull flag.
Bears could argue we’re churning out a m/t top, before a decisive break <4K.
Bulls should be seeking >4170 to have renewed hopes of the 4200/300s.
Bears need a decisive break, and monthly settlement <4K.
Best guess… 4195 is a key high, but if I see any price action >4170, I’d resign myself to the 4200/300s.
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WTIC: oil churned the 78/79s, holding up rather well to the weak main market. S/t vulnerable. My bigger concern would be a HYPER spike, on a ‘bad’ geo-political event. I still see oil, and the related energy stocks as the very last thing to be short.
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Looking ahead
Friday will see import/export prices, leading indicators.
Earnings: DE, AN, AMCX, ABR
Event: As Friday is OPEX, I’d expect considerable chop on higher volume. Further, with Monday Feb’20th CLOSED, I’d expect the preceding Friday to be subdued, and lean to chop.
The market makers could be expected to favour a pin around sp’4100.
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Final note
Always good from Heyling and Weiss.
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We have rate hike symmetry. Yet rate hike nine is due March 22nd, +25bps to 4.75-5.00%
For now, Mr Market is not expecting anything more than rate hikes 9 or 10. Virtually no one is calling for rates of 6 or 7%
If inflation sees a secondary wave higher – as PPI is highly suggestive of, then the Fed might raise 25bps at each meeting into the autumn.
If yes… equities sure won’t like that, and it’d likely equate to sp’3K, not least if the economy stalls, or falls into recession.
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I was never particularly one for prayer, and as much as I hate the sub-human NAZI filth within the Ukrainian military, I will pray things don’t go nuclear. It’d set a horrifying precedent for the 21st century.
I will note, I am very open to the notion that the Russians might perform an air-burst nuclear ‘demonstration’. Something east of the Urals would be most natural. It’d be the ultimate ‘take us seriously, back the hell off’ signal to the west.
With the society/species psychologically fractured, my concern is that any nuclear attack within Ukraine would be the excuse for some of the blood thirsty westerners to begin a large scale (if conventional) war against Russia.
… but Russia has a small population (147M… less than half of Europe), and couldn’t possibly win such a war. It should be clear, Russia wouldn’t let itself be defeated, and would thus fight with hundreds… maybe thousands of nukes.
Were that to happen… well, that’d be the end of the northern hemisphere, and rate hikes would be the least of our concerns.
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Third times a charm
Tuesday I went short from 4155, which was right in the target zone. A mere thirty minutes later… my PUTS were +35% or so. The s/t cyclical setup still offered more downside… but instead, the market reversed upward.
I should have ran for the exit. Instead… I held into early Wed’, which saw early weakness of sp’ -30pts. My PUTS were back to +25%. Early price action wasn’t that bearish… but I still held. With the sp’ settling marginally higher to 4147, I wasn’t pleased last evening. In fact I was furious with myself.
So… I began Thursday, literally writing a note to pin to my desk ‘MUST EXIT’… with a focus to close out, based on the micro 5min SPX and VIX candle charts.
The SPX opened -50pts to around 4100, on the hot PPI, I added a tight trailing stop (literally 3 cents), and was kicked out at 9.33am for a net gain of +30%.
I can’t complain, but I’m somewhat rattled… not with the market, but myself. After some decades, I’m pretty numb to the market swings (not least intraday), what does rile me up… is myself.
The ‘grander outlook’ looks scary bearish, with a basic target of sp’3K. Yet… I need to stick to my own rules more, or I’ll be at risk of making further careless mistakes.
Friday should be comfortable for me, as I’ll be fully on the sidelines, and I’ll merely be awaiting the three day holiday break.
Next week, I’ll consider a re-short, if small size, and only if the SPX remains under 4160. I’m still a little concerned we might yet push into the 4200s… even the 4300s… although today’s closing hour price action argues against that!
Goodnight from London