Official core PCE came in at 3.5% YoY (0.2% MoM) which was high enough to knock fuutres off their overnight highs but not enough to drive VIX above its 10-day moving average.
We pay a lot of attention to VIX as it’s perhaps the most important daily driver of algo behaviour. After poking up above its SMA10 in October for all of nine sessions, it has now spent an entire month ducking below it – stymieing any equity pullbacks…until now.
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Futures are up sharply in advance of the open after a $10 billion GM share repurchase announcement and a GDP revision that did nothing to dissuade algos from the notion that the Fed will soon be cutting rates VIX is plumbing new lows.
The market is rapidly running out of room for a pullback/backtest of any consequence before the end of the year.
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If you floored the gas pedal in your car, the acceleration would be quite apparent. As your speed climbed higher and higher, though, the rate of acceleration would eventually decline until you reached your car’s maximum speed. No longer accelerating, you would still be traveling at an unsafe speed.
Inflation is a lot like that. No longer picking up speed as quickly, price levels for the things we all need – shelter, transportation, medical care, food, etc – are still quite high. The average American won’t be too excited about CPI (just a measure of year over year price changes) if he still can’t make ends meet.
This is why consumer confidence, due out at 10am ET, is so interesting at a time like this. 
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Futures are off slightly on low volume in advance of a lot of important economic data: tomorrow’s consumer confidence, Wednesday’s GDP, Thursday’s personal income and PCE, and Friday’s ISM manufacturing.
We’ve been wondering whether a pullback – any pullback – was in the cards before the end of the year. With VIX being hammered Friday to its lowest level since Jan 2020 – well before the market peaked two years later – the bears are feeling understandably depressed.
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WTI reached our 74 target back on Nov 19, even overshooting it slightly before rebounding to backtest its 200-day moving average. All of this was as expected, as is the latest tumble. 
We sympathize with the fundamental analysts who can’t square these price movements with the very upsetting geopolitical unrest. But, oil/gas prices are some of the most important levers for central bankers bent on controlling inflation and interest rates.
Futures are up modestly this morning as we head into the holiday weekend.
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The Fed will release minutes today, ostensibly providing some insight into their recent thinking. I tend not to get too excited about these, as they are even more carefully parsed that Powell’s remarks to ensure investors algos don’t panic and run for the exits.
But, the Fed doesn’t really want a knee jerk meltup that undoes its inflation fighting efforts either. So, it’s a balancing act of sorts – only there is reason for a backtest at this point.
There’s an opportunity for the bulls to execute an inverted Head & Shoulders pattern if they can take their feet off the gas for a few days and allow a 4-5% pullback. Any takers out there?
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More of the same…
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Wash, rinse, repeat.
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Futures have been pegged at the same breakout level for the past 48 hours now…
…as WTI has now reached our 74.25 target from August.
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PPI tumbled to -0.5% in October (1.3% YoY), the biggest drop since pandemic era April 2020. Core PPI was unchanged MoM and rose 2.4% YoY.
Commodity price weakness was the main culprit, with gasoline’s 15.3% plunge leading the way. The print isn’t all rainbows and unicorns. A slump in PPI could also be interpreted as a sign of economic slowdown and the loss of pricing power. Stay tuned…
Futures have given up much of their overnight ramp, but are still up as we approach the open. As contrary as it might sound, the market is due for a pullback in order to backtest some of its recent gains.
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