Futures are backtesting the SMA10, which has now passed below the SMA50 in addition to the SMA20. It’s normally a clear sign of an impending downturn. With tomorrow’s FOMC decision expected to be a non-event and the midterms just one week away, this is likely the calm before the storm.

WTI futures are similarly pausing after news of a diplomatic sit down involving Iran, Saudi Arabia, Turkey and Pakistan.

DXY continues to firm ahead of tomorrow’s FOMC decision. It will be interesting to watch Warsh repeatedly deny that the Fed is pausing another rate hike for political purposes.

As we’ve discussed in the past, the Trump administration obviously wants a smooth next week with all-time highs in the stock market to engender the kind of warm and fuzzies that will enable Republicans to retain control of Congress. This means a pause in the war on Iran, followed by an all-out, punishing blitzkrieg as soon as the midterms have passed.

Iran, which has maintained effective economic pressure through higher oil/gas prices, would rather not be annihilated by an angry, vengeful Trump who will most certainly blame them (and virtually everyone but himself) for his party’s losses. So, it makes sense that Iran would quickly pivot to a less combative stance that appeals to their regional counterparts.

Of course, a renewed assault on Iran, in itself, would put upward pressure on oil prices – increasing the war’s economic fallout all the same. Trump, never one to let peace, harmony and economic propserity get in the way of his lust for revenge, would thus ensure a worsening of the stagflation the US has been flirting with since he was reelected.

Warsh et al can do little but sit back and hope that the economy won’t be broken by this prolonged inflationary spike. It’s hardly transitory any more.

Tomorrow’s charts will be posted after the Fed press conference and potentially after the close.

GLTA

Futures are modestly higher in the final week before the midterms.

Futures are off sharply on AI fears and increased attacks in Saudi Arabia that are keeping the pressure on oil prices.

The 10Y is off a bit, but not for “good” reasons.

UPDATE: 4:00PM

Hmm…I wonder who might be trying to keep a $100 lid on WTI?

The struggle to maintain the narrative continues.  The administration is doing a good job of keeping oil prices below $100/bbl…so far.

It hasn’t been easy, as the situation in the Middle East is far from resolved, with reports indicating that Trump will unleash hell after the midterms.

As hard as the Iranisns are pushing to get oil back over $100, Trump et al are working to get it back down. You can see it in the daily volatility with prices being hammered after the close every day.

The same thing is happening with stocks, with most bounces coming during the low-volume after hours.

Futures are up moderately, backtesting the SMA50 following last week’s tumble.

Futures are modestly higher following yesterday’s roller coaster market action. Early weakness was offset…

…by aggressive VIX action as the day went on.  VIX almost kissed its SMA200…

…and the TL from Jun 9 before being hammered.

CL also came under selling pressure that really only amounted to avoiding another higher high.

While TNX made a more definitive pullback from its 1.272 extension.

Warsh spoke at an IMF meeting in Bangkok, promising to tame inflation but not shedding any new light on the Fed’s plans for its Oct 27-28 meeting even though yesterday’s PPI print was quite concerning.

GLTA

Wholesale inflation shot higher last month, soaring to the highest level in over four years. September wholesale inflation rose 1.3% MoM and 6.3% YoY versus expectations of 0.5% and 5.3%. It’s the fastest monthly increase since March 2022 and the highest annual rate since Dec 2022, in the wake of 9.1% CPI.

Retail sales slowed to 0.8% after rising a sugprising 1.3% in August. Keep in mind that retail sales is not adjusted for inflation, so was nearly flat on a net basis.  Also keep in mind that these are the data which has been blessed by the White House. How much worse were the actual data?

Futures are moderately lower as we approach the open.

Equity weakness has been particularly pronounced in the tech sector, with CRWV plunging 15% and ORCL 10%. Even INTC shed 6% and NVDA slumped by 3%. COMP should test its SMA50 today, and is on track to test a TL from Apr 2025 that targets 24855, a 10% correction from its recent all-time highs.

continuing…

Headline CPI rose 0.6% last month after climbing 0.4% in August.  Annual CPI advanced 3.7% versus 3.4% in August. And, core CPI rose 2.6% versus 2.4% last month.

Futures are not amused.

The culprit, of course, is rising oil and gas prices.

And while the 10Y is hesitating…

…the DXY is surging.

When the largest asset manager in the world says to reduce equity exposure, it makes sense to listen. From Marketwatch:

“…bond yields can no longer be ignored, and the world’s largest asset manager is now shifting money into Treasurys — specifically shorter-term paper — while taking some U.S. equity exposure off the table.”

We heard the same from Paul Tudor Jones on CNBC this morning, comparing the current environment to 1999.

“2027 is going to be really, really challenging for the stock market…I’ll be short the whole year. There just — there’s little value,”

Futures are slightly lower ahead of tomorrow’s CPI print.

Like us, Jones is bullish on oil – saying that prices could rise another $25/barrel. I couldn’t agree more – though he suggests it will happen after the midterms while we’re leaning toward before the midterms. Either way, it wouldn’t be great for stocks.