All Good Things...

All good things come to those who wait. Or, so the saying goes. It’s not always easy. The past few weeks have sorely tested bears’ patience.

For many weeks we’ve been wondering when the rising channels would break down. It seemed inevitable, as oil and gas were causing inflation problems, USDJPY had reached a turning point, and VIX was threatening to break out. The post from Sep 21 see: [Quad-Witching] is one example:

But, we’ll see what happens this weekend in Algeria. CL and RB are long, long overdue for a correction. Combined with USDJPY running out of steam and VIX due for a breakout, this would not bode well for stocks.

Yesterday, SPX’s red channel broke down and it made a beeline for the yellow neckline at 2780, closing just above it. It was a long overdue backtest. Interestingly, it leaves the 2.24 Fib extension at 2703.62 within striking distance.With CL off nearly 7% and RBOB off 8% over the past week, and USDJPY having reversed where expected, it appeared fairly likely. Had VIX not reversed at our next upside target overnight, SPX might be tagging 2702 on the open this morning.Is this another question of “when” and not “if”?

CPI just came out. One comment… Gasoline’s 9.1% increase over September 2017 was greatly muted by last September’s huge spike. October will not enjoy the same benefit. If the Fed is looking for an excuse to pause rate hikes (without appearing to acquiesce to the Inflator-in-Chief) as I believe they are, gas prices must continue falling.