More earnings carnage overnight and the S&P is back at the range lows it has held for months. Will this be the one that breaks them? Plus 2 risk free Double Dip butterflies, crude dings $104.50 and Bitcoin falls out of bed.
...The Nasdaq 100 Fell 1.4% After Earnings and the 2-Year Fell 6bp. Which One Did the Bond Market Read?
Alphabet, ServiceNow and Fortinet reported before Thursday’s open and the Nasdaq 100 fell 1.38%, almost all of it at the opening gap. The same morning September PCE printed 3.6% on the year and the quarter’s PCE price index 2.1% annualised, from 5.0%, and the 2-year fell 6 basis points to 4.61%. Flight from equities or a read of the quarter: the clock assigns one leg, shares another and leaves the afternoon open; the calendar settles the rest.
...Two nights of results have Nasdaq futures 3.52% below Wednesday’s settle and S&P futures 1.36% below. Alphabet, ServiceNow and Fortinet reported before Thursday’s open and 95% of the Nasdaq 100’s 1.38% fall was the opening gap; Amazon, Intel and Reddit reported after the close and the futures were 2.15% lower at the capture. In between, 9 of 11 sector proxies rose, and the 2-year fell 6 basis points on a 2.1% quarterly inflation print.
...The Fed went sput sput fizz, GOOG dropped 11.5% after hours, and the indexes carried on behaving. The Double Dip strategy banks its first official win on SPY with $165 locked in as a minimum profit floor.
...The FOMC held at 3.75 to 4.00% on a 10-2 vote and the long end rose 6 to 7 basis points while the front end fell 3. The textbook says a hawkish split lifts the front end. Here is what the curve did instead, and the one test that would settle it.
...The FOMC held at 3.75 to 4.00% on a 10-2 vote with both dissents for a hike, the 2-year fell 3 basis points to 4.67% and the 30-year rose 7 to 5.37%. Alphabet reported 127.58 billion dollars of revenue at 20:02 UTC and 51.4 billion of capex on the call, and Nasdaq futures read 1.27% lower by the 07:45 UTC capture; Microsoft was 2 to 5% higher. GDP and PCE at 12:30 UTC.
...Day 2 of the opinion lining up with the system. S&P and Naz push off the range lows, VIX loses its nerve, the PnF breaks out toward 7820, crude’s triangle grows up into a channel, and the Poppers lock in a loss then a profit. Storm Boelo optional.
...Both volatility indices fell more than 4% on the day before the FOMC statement, to 17.52 and 97.88, while the front end of the curve rose 2 basis points and the back eased. The textbook says event risk gets dearer into the event. Here is what would settle whether the market was right.
...The VIX fell 4.73% to 17.52 and the MOVE index 4.22% to 97.88 on the session before the FOMC statement, both at their lowest close since 21 October. The Nasdaq 100 rose 1.29% with 6 of 11 sectors lower and 65% of the move has no named cause, Boeing fell 10.69% and the Dow rose 16 points, WTI settled 99.90 and was 101.90 by 09:25 UTC.
...My direction call was right for exactly 1 day. The S&P and Naz are nudging off the range lows, the uncles are stalling, VIX has come down from its espresso high, and the SPX point and figure chart needs 7720 before the bull breakout switch flips.
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