There’s not much to be get excited about in these past 24 hours as we ease into the last session of the quarter.  RBOB dropped to our initial target but seems to be hung up there for reasons we discussed yesterday.  Stocks are levitating nicely, but one gets the sense the other shoe might be about to drop.

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It starts out with a bright, buoyant red balloon, but goes downhill awfully fast.  (spoiler alert: a sewer-dwelling, child-devouring clown that somehow isn’t all that funny.)

So it is with this market.  The S&P 500 has been floating along for over two weeks, close enough to 2500 to reach out and snatch it any time it likes.   Yesterday, it finally tagged our 2510.87 upside target and managed to close above 2500, with only two days to go before quarter-end.

Is this the start of the next leg up, or should we be alarmed by those sinister sounds gurgling up from the sewer?  [And, no, it’s not just RBOB, which hit our next downside target overnight.]

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In what were generally viewed as hawkish comments, Janet Yellen reinforced the widely held expectation of a rate hike in December.  USDJPY is rallying strongly in response.

After struggling for the past week at the SMA200 and, more recently, at a TL off its recent highs, it is making a show of breaking out.  Needless to say, equity futures are responding in kind.continued for members… (more…)

Futures are slightly positive this morning even though RB and CL are slumping — primarily on an overnight VIX dump — off 9.9% from yesterday’s highs. Note the SMA10 at 10.08.Traders will remain focused on Fedspeak and North Korea, either of which has the potential to upset the month-end run for the barn.

SPX and ES both reached our initial, minimal backtest targets yesterday.  As I posted last night, the next steps are a bit muddled.

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Futures are currently off about 5 points as VIX, again, pokes its head up over 10.  This has been going on for the last 7 sessions or so.  Again, the question is whether it’ll last this time.  Overhead resistance awaits at 10.75.continued for members... (more…)

When you live by the algo, you have to be prepared to die by the algo.  With only 10% of daily equity volume being driven by fundamental, discretionary, carbon-based investors, 90% of the volume is subject to the whims of the silicon-based traders.

This morning, we have the S&P 500 trying very hard to hold 2500, but VIX and the JPY are both creeping higher due to geopolitical risks (a hydrogen bomb, now?)  There’s only one tool left in the algo shed: CL.  And, unless it settles back down tout de suite we’ll see September CPI pop above 2% — not exactly on the central planners’ play list.

So, what’s more important — holding 2500 or averting inflationary headlines?

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When the Fed, which employs hundreds of economists and PhD’s says they don’t understand inflation, is there any hope left for humanity?

Come on, guys.  It’s pretty straightforward…wouldn’t you say?  On the one hand, there’s the fairly significant $14 trillion in financial assets you’ve bought up over the past few years.

Then, there’s basic commodities like oil and gas which are bid up to support stocks (but, have nasty side effects.)

Bottom line, there are plenty of charts that could help explain inflation if the Fed is really stumped. Or, maybe it’s just that Central Bankers, chock full of ex-Goldmanites, are more worried about charts like this one.continued for members… (more…)

I consider gold a good indicator of the inflation fever out there.  Note that it recently broke down from its latest rising channel (white.)  So, it would be easy to say it’s done, that there’s little chance of it reaching 1380.  Readers will recall I suggested bowing out at 1348.60 [the yellow arrow, see: Sep 6 Update on Gold.]

Personally, I’d close or trim back my long position here, or at least set some stops at this level. Every tick higher from here brings with it the risk of a sudden dump — one that need not be precipitated by news or events.

GC punched above 1348.60 for all of two days before succumbing.  Its slide, since then, has correlated with that of the US Dollar — which understandably has gold traders’ knickers in a bunch.  With the Fed’s inflation outlook due out shortly, does it still have potential to go higher?

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Welcome to another FOMC day.  If you read yesterday’s post, there is absolutely nothing new to report today.  SPX, DJIA, COMP, NDX and NYA are all at or near all-time highs, while XLF and RUT are at important resistance.

As usual, there has been much speculation regarding the Fed’s future plans.  As usual, the FOMC will do its very best to not upset the markets.  What does this mean?

While they would love to see a steeper yield curve, more robust growth and higher inflation, everyone knows we can’t afford higher rates — hence the US dollar’s steady decline and an unwritten policy to keep inflation near, but no higher than, 2%.

Since the dollar has been in a funk, the yen carry trade hasn’t worked so well of late.  And, since higher oil and gas prices could push CPI above 2%, that particular avenue has been of limited use.  Fortunately for bulls, hammering VIX has done an excellent job of driving algorithms and the 90% of share volume that they steer.

Chances are, today’s the day we find out whether or not our assumptions regarding interest rates, inflation, currencies and equity prices make any sense.

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In our last update on RUT [see: Feb 13 Update] I noted that RUT had returned to test an important Fib level at 1392 and the top of a long-term channel after a very modest setback the first time around a few months earlier.  The path forward was a little murky, so I laid out both sides of the ledger.

Head fake, or a sign of weakness? The next few days are very important, as RUT has an opportunity to break above the yellow channel that dates back over 20 years… At this point, support is up to 1330 and, after that, at 1296.  If it can break 1400, it will leave the rising yellow channel in the rear view and won’t face overhead resistance until the purple 2.24 at 1493 and the 1.618 at 1514.09. The latest IH&S targets 1444, which is in the middle of nowhere.

As it turns out, I was fairly close on the targets — RUT found support at 1335 and rallied as high as 1452 — but, things aren’t all that much clearer.

RUT pushed above 1392 the very next day, but couldn’t make any headway.  Thirteen sessions later, it was back below 1392, tumbling 5.6% to make new lows.It mounted another effort in late April.  Again, the rally failed and it fell 5.2% (but, to higher lows.)  More failed rallies followed in June and July, with the last producing a 7% decline.  Every time RUT rallied, it produced a higher high.  And, every time it slid, it produced a higher low — except the last.  The Aug 18 low was slightly lower than the May 18 low.

It might not matter, but that decline also represented a breakdown of the rising white channel which had been guiding prices higher since Feb 11, 2016 (yep, the day oil bottomed) and also produced a rare drop through the SMA200.

The SMA200 was since recovered, but RUT has now reached a key Fib retracement of the latest drop and is…drum roll please…back at the top of the rising yellow channel.  At the risk of repeating myself: “head fake, or a sign of weakness?”

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