As if yesterday’s Cohen and Powell testimony weren’t scintillating enough, the talks with North Korea broke down and a bevy of important economic data is due out this morning.  Will we finally see stocks take notice, or will VIX continue to keep the fireworks to a minimum?Advanced 4th quarter GDP is due out at 8:30 this morning.  Following disappointing retail sales and core capital goods data, few are expecting an improvement over Q3’s 3.4%. Consensus seems to be around 2.3%, though I’ve seen credible estimates at 2.1-2.2%.

A miss could compound things for equities, which are already struggling after news that Trump packed his bags and walked out on Kim Jong Un.

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Powell is likely to run into more aggressive testimony in his second day of congressional testimony.  Few House members rake in campaign contributions anywhere near as large as the average senator.

Markets are generally quiet, especially after all the intraday damage control seen yesterday.  If he should stumble, of course, there’s a lot of dead air below current levels.

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As Powell prepares for his Monetary Policy Report to Congress (10am, Watch Live), is he paying attention to the bond market?  Prodded by abysmal housing data… …ZN finally broke out.

According to Kudlow, last month’s retail sales miss was a glitch.  What about the 10.5% YoY drop in single family permits or the 15.9% plunge in multifamily permits?  How about wholesale inventories that expanded at twice the expected rate last month?

The bond market isn’t waiting for Powell to proclaim that the data has been anything but rosy lately.  With ZN breaking out, we can expect the next 4-6 weeks to be very interesting.

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It’s been two months since oil and gas reached our downside targets [see: Throwing the Game.]  Since then, WTI (CL) has bounced 36.4% and RBOB has bounced 30.6%.  CL has plowed through several upside targets since then, finally reaching our 57.48 target last Wednesday.  As we’ve discussed, it’s not just the chart patterns that suggested a reversal.  It’s also the economics of higher oil and gas prices which, as Trump reminded OPEC this morning, threaten the low-inflation narrative which makes a dovish Fed stance possible.

We’ll take a look at whether this top is likely to hold and what the implications might be for inflation and interest rates.

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VIXploitation continues, as the “fear index” continues to drive stocks higher.  Yesterday’s collapse in the last 30 minutes… …was enough to shave 10 points off of SPX’s losses. Nothing new here.

Note that ES’ previous pushes above its 2.24 Fib (dashed purple line) required that VIX dip to the yellow horizontal support at 16 (b, c and d.)  The latest, however, required a drop below that support.  In other words, it’s requiring more effort to effect the same result.Are investors finally catching on?  Maybe, just maybe, there’s more selling pressure from the carbon-based crowd than usual.

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In our December 26 Update, we noted that gold had broken out of a rising channel and was headed for several upside targets including 1292.10, 1346.30 and 1369.40.  Yesterday, it reached the 1346.30 target — a nice 14.7% rally since our Aug 15 bottom call at 1173.60.Interestingly, its latest spike has coincided with continued strength in DXY — an unusual but not illogical occurrence.We’ll take a look at why this is happening, and what’s ahead for gold.  Is it’s strength a warning, as some have suggested?

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We had a lovely snowfall Sunday night. The Monday morning landscape was exquisite, with a beautiful frosting adorning the pines lining our street. There was just enough snow underfoot to look charming, but not enough to require shoveling.

Unfortunately, there was also just enough to hide the dangerous black ice lurking below.  As I lay on the couch later that day, trying to recover from the inglorious splat I executed on our driveway, I realized I had happened upon a pretty good analogy for the current state of the markets.

Everything is indeed gorgeous on the surface.  Just this morning, we are reminded that some retailers such as WMT are doing wonderfully (even if they’re just stealing market share from the multitude of retailers that are closing up shop.)  But, what about the dangerous undercurrents that no one notices until it’s too late?

One of my favorite chart patterns is the consolidating triangle, seen this morning in the 10-year note futures (ZN.)  In a way, it’s like black ice — lulling investors into a false sense of security that everything is contained.

Readers will remember that ZN came up just short of our 123’100 target on Jan 3.  It would have capped off a lovely 5% rally since our bottom call (top call on rates) in October.

As rates plunged toward our 24.98 target on Jan 3, stocks took notice.  The Dec 24 rally began to falter.  The DXY began to falter.  Our yield curve model woke up.  Clearly, something had to be done.  The charts show the resulting triangles which formed in the aftermath of a bounce in yields, droop in prices.  The targets are still there.  But, now they’re waiting for the triangle to break out or break down and — more importantly — for stocks to build a little more cushion before playing out.

With SPX and DJIA well above their 200-DMAs, they’re in the clear.  COMP, however, has struggled to reach its 200-DMA, let alone push above it.  Recall that it faced similar problems in November, when a push above its 200-DMA faltered, and again in December when it failed to reach it at all — producing a 17% plummet.With the 10Y triangles about to break out or down, CL and RB at or near our upside targets and VIX having reached our next downside target, is the market about to go splat?

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After pushing above its 200-DMA and key 2.24 Fib levels, SPX seemingly had it made in the shade.  This morning’s huge retail sales miss (-1.2% versus +0.1% expected) might complicate things.  Perhaps Bloomberg put it best in the title of the following chart.

The control group came in at an even more dismal -1.7%, the worst since the 9/11 terrorist attacks. The latest data is clearly at odds with the growth narrative being pushed by the White House, and adds to the headwinds posed by numerous high-profile earnings misses and falling inflation.

January CPI came in at 1.55%, the smallest increase since Sep 2016.

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