Futures are off sharply after NY Fed president John Williams’ comments regarding rate cuts and continuing weakness in chip stocks.

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A rather worrisome development in the bond market is threatening equities’ meltup.

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SPX is slated to challenge its 1.618 extension on the open after strong moves in the currency market and continuing hesitation by oil/gas.

The bond market continues to be the real risk to the bull case.

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RUT came close to breaking out yesterday after a historic 3.57% gap higher. In last year’s in-depth look at RUT [see: Feb 8, 2023 Update], we made the case for a drop to 1629 in May.

If, as I suspect, it fails in the next week or so, 1536-1554 is still in the cards. This was the original most logical target all along. The middle ground would be to continue bumping along until the rising white channel midline arrives at 1629 around May.

As it neared our 1629 target in April, RUT attempted one more comeback before plunging to 1633 in October.It rallied sharply into the end of the year, as did everything else, finally reaching our next upside target — its .618 Fib — in March. Until yesterday, it had been rangebound – making lower highs and higher lows.

We’ll take a closer look at this latest move and its implications.

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June CPI came in lower than expected. Headline CPI was -0.1% MoM versus +0.1% expected and 3.0% YoY versus 3.1% expected. Core was +0.1% MoM versus 0.2% expected and 3.3% YoY versus 3.4% expected.

Futures initially added to their overnight gains but are approaching flat again, perhaps in recognition that SPX had already reached important Fibonacci resistance yesterday.

The July CPI print should be the first month to fall below 3% as long as oil/gas prices remain steady or lower for the next few weeks.

The bond market responded quickly, with the 10Y tagging our next downside target.

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While the Fed is unlikely to lower interest rates in July, September is looking more and more likely. There are three more CPI prints due out before their September 17 meeting, and there’s a very good chance that tomorrow’s print will feature a 2 handle.

Futures are drifting higher again this morning on positive support for algos.

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Powell’s testimony before the Senate Banking Committee today will hopefully provide some context to the Fed’s interest rate plans. In the meantime, futures are content to continue melting up in advance of Thursday’s CPI print.

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Futures are up modestly ahead of the open as traders look ahead to Powell’s congressional testimony and Thursday’s CPI print.

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As expected, ES has broken out above the trading range it’s been stuck in since June 17. continued for members… (more…)

Equity prices have been stuck in a tight range for over two weeks, struggling to top important Fibonacci resistance. Fortunately for bulls, another holiday has arrived.

SPX is within striking distance of our Jan 8 Inverted Head & Shoulders target [see: A Look Ahead at 2024.]

The most important chart pattern for SPX is the large Inverted H&S Pattern which completed on Dec 11.  It points to 5727 (a 24.5% rise from the neckline) and, if it’s to align with the large rising yellow channel, would reach its target in late June 2024.

Can stocks push through the current resistance? The answer lies not in the stock market, but the bond market.

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