VX (VIX futures) bounced this morning and is back above its 200-day moving average, keeping bears’ hopes alive for lower lows.

The turn can be seen in VX’s RSI which very noticeably bounced on the yellow trend line from Nov 2024. This trend line has been more influential than the traditional RSI-30 line, which hasn’t been touched since May 2024 when it powered SPX to its 2.618 extension of the COVID crash in Feb-Mar 2020.

These RSI troughs usually line up with new highs in SPX, though this time it came up just shy of its Jan 28 highs at 7002.28. As we have previously noted, it has left some massive gaps in its wake – most notably at 6618.26 on Apr 7. But, we are also due a backtest of the 200-day moving average, currently at 6675ish.

The pattern is beginning to resemble the 2015-2016 correction. Recall that the initial 4.2% correction was terminated at the SMA200 and rebounded (twice) to just shy of its previous highs before plunging to a -12.5% correction. It bounced sharply to near its former highs, then plummeted over 15% – finally backtesting the 1.272 extension of the 2007-2009 GFC crash at 2138.

The sequence illustrates the shortsightedness of engineering a rebound before reaching significant support – in this case the 1.272. SPX had backtested it before, but that was a rather infamous (illegitimate?) bounce on Oct 15, 2014 when Fed governor James Bullard mused on Bloomberg about yet another round of QE.

It’s too early to assume that we’re looking at an analog which would take SPX down to 6150-6225 or 5646 (in mid-July, my favorite scenario.)  But, if the administration keeps cocking things up in the Middle East, it’s not too hard to imagine such an outcome.

Approximately 40% of China’s oil comes through the Hormuz Strait. Or, at least it used to before we started blockading it. They were thought to have a 120-day strategic reserve. Since the last tanker bound for China sailed through the Strait one week ago, things could get pretty dicey around early August. If Iran wants to see Trump neutered (he’s doing a pretty good job of it all by himself) they’d hold off on any peace deal until after the US midterms in November.

Bottom line, the closer we get to August without China’s oil supply resuming, the greater the chance that China does some blockading of their own – say, Taiwan. With so much of our munitions being depleted in Iran and a clown car full of Trump cronies in charge of negotiations, the thought of an escalating conflict with China is pretty damn distressing.

Stay tuned…

PPI for final goods was reported at 0.5% MoM and 4.0% YoY, much lower than legitimate estimates (those grounded in reality and free from punitive oversight.)

Combined with oil and VIX futures being hammered and a handful of positive earnings reports, SPX has reached its .886 Fib retracement at 6924.15. ES is still slightly shy of its at 6994.94.

VIX has now fallen 43.5% in the past 10 sessions, reaching potential channel and RSI TL support.

But, the bigger fundamental factor remains oil, which has declined in the face of the US blockade of Iranian exports.

Stay tuned…

Unable to force Iran to reopen the Strait of Hormuz militarily or through negotiations, Trump announced instead a blockade of the critical passage.

“Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz.”

Oil prices spiked back above 100.

 

Futures fell sharply in the pre-market, but have recouped about two-thirds of their losses.

 

And, a very large gap remains at 6618.26 – about 200 points lower.

 

 

 

 

CPI continues to rise, reaching 3.3% YoY, taking into account only about two-thirds of gas prices’ recent surge. And, it’s important to point out that WTI is still pushing $100/bbl in the midst of a nearly full stoppage in the Hormuz Strait.

If the relationship holds, CPI should be closer to 3.75-4.00% in April.

The March print reflected a 18.9% increase, but the actual YoY price increase currently sits at 30%.

But, VIX has broken down and a handful of tech stocks popped over important resistance. So, futures are up – though still bumping up against channel resistance.

And, SPX’s gap is way down at 6618, 250 points ago.

 

Oil and gas remain stubbornly high, and will for some time.

 

And, DXY has found good support here.

 

I’ll believe a deal with Iran when I see one…

Depending on where you get your news, the ceasefire with Iran was either a master stroke 4D maneuver or a complete failure based on a stack of lies. Oil is still 40% more expensive than it was before the US attacked Iran, and 60% more expensive than it was a year ago. This doesn’t bode well for inflation. And, then there’s the matter of weapons continuing to be fired at each other.

Nevertheless, SPX soared on the initial news, leapfrogging its SMA200 and SMA50,  and not very surprisingly held onto its gains despite the qualifiers that came late yesterday afternoon. It didn’t make it out of its falling channel, however, so the stage is set for a retracement unless TPTB can convince the algos that the ceasefire is real and will last.

 

That’ll be hard to do unless VX breaks down…

…and CL stops rebounding.

Once again, the market is celebrating the (not quite) elimination of a very serious threat to the global economy. Of course, it’s a two-week pause.  But, it gives the US an off ramp that appears less a TACO and more a magnanimous concession to peace and brotherhood.

Futures are up over 2.5%, bumping up against the falling channel top.

 

VX is off over 13%, but keep an eye on its RSI, which has yet to break down below a TL from last May.

Stocks aren’t quite out of the woods, perhaps reflecting the fact that it’s only a pause and not necessarily a lasting solution to high oil prices which are still in the 90s. Whether or not the Hormuz Strait is open, a lot of oil production and transportation has been interrupted, and it will take months to get it back online.

In the meantime, we will have inflation which will, at the very least, prevent any rate cuts any time soon.

The bulls also need DXY to dip below its 200-day moving average.

stay tuned…

WW3 isn’t the dominant scenario, but it is attracting more and more adherents. Serious institutional estimates range from 18-30% depending on how things go tonight with Trump’s deadline. Polymarket rated the odds at 22% before the scenario was pulled. RAND sees a 20-30% chance of a global conflict in 2026.

Futures are off only 30 points, less than 0.50%. So, it’s safe to say that markets aren’t as worried as they could be and, perhaps, should be. Maybe it’s because Trump has a long history of chickening out after issuing bombastic threats. But, this time he just might have unwittingly set a trap for himself that cannot be easily escaped.

Unless he does back down, SPX’s chart suggests immediate downside to 6150-6225 (ES 6260.)  Stay tuned.

Futures are flat as another week of war worries will challenge Friday’s CPI print for the most important driver for markets.

continuing…

We asked yesterday whether we could believe that Trump was really ready to quit the Iran war. Watching his television spot last night as he maintained an even, conciliatory tone for a few minutes, it seemed like there was a good possibility.

Then came the comments about bombing them “back to the stone age, where they belong.” This was the Trump we know so well, the one who just can’t help himself. For a moment, I was transported back to 2020 when his daily comments on COVID were so obviously wrong, so blatantly self-serving, and ultimately so fatal to millions.

Needless to say, investors were disappointed. The market is not buying the idea of an imminent end to the war. But, there’s plenty of oil buying. WTI is over 13% higher overnight, well on its way to our 121.89 target.

Futures are off about 1.5% and in danger of breaking below recent lows, where there would be a dramatic downdraft.

VX held the yellow channel bottom and is up around 9%, but have yet to make new highs. Note that equity bottoms don’t usually produce new highs in VX unless there’s a panic.

Currencies are still pretty quiet, with DXY strengthening in response to elevated equity risk and higher interest rates.

 

 

Bottom line, the risk of another 10% drop increased rather than decreasing over the course of Trump’s 21 minute screed. We’ll see what happens now that thousands of marines and paratroopers have arrived…

With any other administration, I might believe that there is a good possibility of a negotiated settlement with Iran that allowed oil prices to tumble back to the 60s. But, with thousands of troops steaming toward the war zone, I have a hard time believing that Trump is prepared to pull out and leave the Hormuz problem (that he created) to others to solve. At current levels, we’re merely testing a channel top…

…and, with SPX, a channel midline. SPX is still some distance away from its SMA200.

It would be easier to get on board if VX broke down.

Note that CL hasn’t come close to breaking down.

And, what happens after Iran escalates attacks on western targets? They will reportedly attack numerous tech firms such as Apple, Google, IBM, Intel, Microsoft, Tesla, and Boeing beginning at 11:30 ET this morning.