Last June, WTI tested the top of a huge channel dating back to the year 1999. At the time, CPI was 5.4% and the 10Y was around 1.5%. A pullback here would have allowed inflation to top out and for rates to stabilize.  Indeed, WTI pulled back almost 20%, whereupon the stock market noticed and began one of those “terrifying” 3.5% declines.

By the time SPX reached its 50-DMA, WTI was gearing up for another test of the channel top (the white arrow below.) Many observers, including yours truly, expected the folks running this casino to take heed of the bond market’s warning and allow oil and gas prices to decline.But, on September 20, SPX did something it hadn’t done in six months. It plunged below its 50-DMA (the white arrow.)

This was clearly an emergency calling for drastic action. The end of the quarter was coming up, and after that, the end of the year. A decline to the bottom of the red channel, where the SMA200 patiently waited, would mean a mere 10% gain for the year.

They got greedy. Or stupid. Or both. They crashed VIX to new lows……had USDJPY break out of a 5-year falling channel…

…and, just to be absolutely certain of new highs in the stock market, made sure that WTI broke out for good.

SPX responded, of course, soaring to a 2021 gain of 26.9% and closing out the year at all-time highs.The Fed still had a chance to get things under control. Sure, CPI was now 7%. But, the 10Y was still well below 2%. All they had to do was get oil and gas prices to stabilize.They might have pulled it off if not for those pesky Russians.

When WTI spiked up above all resistance, the game was over. It was time for the Fed to own up to their past misdeeds (not mistakes) and admit that the laws of economics were still intact and required that they start thinking about thinking about raising rates.

Never mind that the market had already done it for them.  Today, we should learn what they’ve already told us: very cautiously, in a data-dependent manner, yada, yada, yada…  The futures are up 1.5% at the opening bell just in case investors aren’t too happy with what they hear.

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There has been a lot of talk, lately, about an impending death crosses – where the 50-day moving average drops below the 200-day moving average. It’s supposed to be a harbinger of severe bear markets. Yes, the S&P 500 is about to do this (the white arrow below.)

And, it’s possible that it will add to the bearish pressures on stocks. It’s also possible that it will mark a bottom.

Sure, in 2008 a death cross was followed by a long, protracted bear market.

But, in 2020, the damage had already been done and SPX was well off its lows and on its way to new highs.

It would be easier to be afraid of a death cross if the Fed and other central banks weren’t so involved in propping up markets – something they’ve greatly perfected since 2008. We’ll look at the case for/against it making a difference.

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Headline CPI reached 7.9% in February, a new 40-yr high (but still well below actual inflation which exceeds 15%.)

All categories are all well over the Fed’s 2% annual target with little hope of a pullback any time soon.

Energy prices continue to soar, with gasoline prices near new all-time highs.Even at these levels, however, they continue to diverge from headline inflation on a YoY basis.

As expected, futures have given up much of yesterday’s nonsensical gains.continued for members… (more…)

Futures are up sharply on idle speculation that the Ukrainians and Russians are closer to a resolution of their differences. Or…maybe it’s just that CPI is coming out tomorrow and the Fed would like a little more cushion in the markets before a print that could be ugly.

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It’s been a very carefully managed decline so far. With CPI coming out on Thursday, that might change real soon.

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Like most Mondays (the white arrows), we’ve seen another sharp spike in VIX which was subsequently smacked back down the opening bell……this one producing an 87-pt bounce off the overnight lows.Today’s post will pick up where we left off on Friday. This morning, EURUSD reached our 1.0829 target set last June.

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Almost a year ago we noted that EURUSD’s nonsensical rally would fail and the longer term trend resume. Its recent breakout, manufactured to support stocks, had essentially no economic basis.

Today, as EURUSD approaches that 1.0829 target we charted back then, it seems that economic reality is finally reentering the picture.

Does Putin harbor a more sinister motive in attacking the Zaporizhzhia nuclear power plant? Could the threat of a scorched-earth nuclear “accident” there help drive Ukrainian opposition out of the area, effectively forming a buffer zone that essentially shifts Russia’s border further to the west?

What would that mean to the EU?

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Rumors are flying fast and furious.  Will a new nuclear deal be signed with Iran, thus adding 200K barrels per day back into global supply? Will Russia be frozen out? Futures popped 40 points on the speculation, though the IH&S has still not played out.

As we said last week, nothing would be as effective at punishing Russia and helping to solve the inflation problem as crashing the oil market. Stay tuned.

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