As expected, futures just joined SPX in making new all-time highs.  All it took was sneaking CL above its SMA200 and repeatedly hammering VIX below its SMA10.  Child’s play for central planners.But, in guarding against any declines, ever, they have run into some issues that might limit the techniques’ effectiveness going forward.  We’ll take a look, and update currencies while we’re at it.

Last week’s targets and caveats remain in place.

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Last week’s declining CPI should have sounded alarm bells for investors betting on the reflation trade and higher interest rates.  However, it marked a buy signal for oil.  Given that oil prices are a primary driver of equity prices, and given that the current YoY picture indicates even lower inflation going forward, it’s time for a boost — which is exactly what’s happening this morning.CL has made a strong move, pushing back above the SMA200 and white channel bottom in a 3.40% pop on news that OPEC hopes to continue “constraining” supply in an effort to reduce inventories and raise prices.

That’s all well and good.  But, the important thing is how the algos react. As the cash market prepares to open, the algos are liking the increase in oil prices very much.

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As we’ve expected, the whole rate hike argument collapsed this morning.  CPI, Core CPI and retail sales all missed.  The Fed will continue talking up the dollar, of course.  But, it isn’t looking good.

The US dollar is, predictably, tumbling — taking USDJPY along with it.After nailing our downside target yesterday and rebounding nearly all the way to our bounce target, equities are currently indicating a slight loss.

Only VIX, which is off 6.7% since reaching our upside target yesterday, and WTI, which continues on a suspiciously uniform rally, are keeping futures near even.

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See if you can spot the period during which the cash market was open in the USDJPY and WTI charts below. This one’s almost not fair, as VIX’s “breakdowns” have been as regular as clockwork.Now see if you can spot why the ramps happened when they did, and why our next downside target at 2383 isn’t such a problem for the bulls.  Below that…well, that’s a different story.continued for members… (more…)

While most pundits seem to be blaming Trump’s suspicious firing of FBI Director Comey for yesterday’s market slippage, the more important factor was USDJPY’s reversal late in the session.  It was USDJPY’s breakout that, along with VIX’s continued hammering, encouraged the latest all-time highs.  So, the fact that it ran out of steam at an unusual spot caught some by surprise.  It would have been surprising to me, too — except for the fact that the USD has run into formidable technical and fundamental resistance.

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We got new all-time highs as expected, yesterday.  Never mind that it took a breakout in USDJPY, a breakdown in VIX and a sharp rebound in WTI.  There’s even a clever bit of Fed positioning in the works for good measure.

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Still traveling today, but should be back in the office tomorrow morning.  The big news over the weekend, of course, is Macron’s victory in the French election.  While the EU might not be saved, at least its demise has been postponed a bit.

Here are the charts I’d keep an eye on today.

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I’m on the road today, but wanted to post a few quick charts.  The biggest development last night was oil, which continued falling after breaking through the support we discussed several days ago.

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CL tested the SMA200 for several days before finally closing below it on Monday.  I had really expected the moving average to hold, so had deleted the additional downside targets a couple of weeks ago.

Here’s a chart from last month, with those targets still intact.  The red .786 at 42.68 and the purple .618 at 37.2 still work. But, note that CL just tagged (close enough) the midline of our preferred red channel and is getting a nice bounce.

We also have to think about what even lower prices would mean: a big drop in inflation — relieving all pressure to raise rates, and potentially even more accommodative measures.  There are a few Fed official slated to give speeches today, so it’ll be interesting to hear what they have to say.

I’m actually glad the white channel finally broke down.  It never made much sense to me as the upside it indicated was always pretty ludicrous.

CL’s initial plunge has been bought, probably just to ensure the damage is contained before markets open.  Could be that 43.76 was the bottom, in which case we should get a backtest of the broken white channel.Futures have managed to hold steady thus far, but our downside targets remain intact should they be allowed to play out.

VIX is still within striking distance of its all-time lows.

And, USDJPY never quite reached its SMA100 yesterday, meaning it can ramp quite a bit without actually breaking out.  Of course, if it does break out, there is plenty of room between current prices and its ultimate upside target at 120.11.That’s about it for now.  I might get a chance to post later this afternoon.

GLTA.

The BoJ, which has been the most egregious manipulator of markets for years now, has a problem.  All it would take to solve it is about 60 points on the NKD.  This is a very screwed up chart, in so many ways — not the least of which is that it has no basis in fundamentals.  The election of a protectionist president in the US was supposed to benefit Japan how, exactly?

But, as in the US, the narrative was adapted to fit the objective.  Also, as in the US, Apr 17’s VIX smackdown prevented the next logical step — a simple 50% retracement to tag the rapidly rising SMA200 at 17940.  The NKD remains the poster child for broken, heavily manipulated markets.

Beginning on Dec 20, 2016, NKD has tagged the .786 Fib at 19669 eight times and come close a couple of dozen more.  There have been five near breakouts since the Jan 9 high of 19745 — only 0.38% above the .786.  Are we really supposed to believe the BoJ can’t engineer a 0.38% rally?

The reality is that can do it any time they like.  The timing just hasn’t been right — begging the question: is it now?

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My working theory for oil price forecasting got a big boost yesterday.  Regular readers will recall that we’ve had some very accurate calls over the past 15 months — ever since calling the low on Feb 11 [see: USDJPY Finally Relents.]

My premise back then was that algos had become so focused on the price of oil that it needed to rebound in order to prevent the collapse of stock prices below critical support.  It also gave USDJPY, previously the most important driver of algos, a chance to fall back to earth lest Japan develop “inconvenient” inflation.

Since then, however, the focus has shifted to micro-managing inflation numbers.  The dollar had dropped almost 9% in only 5 months, and desperately needed support.  All the jawboning in the world wasn’t helping.  But, when CPI topped 2% and kept going — largely  on the back of rising oil prices — the FOMC’s rate hike narrative finally sounded plausible.

WTI rose from 26.05 on Feb 11, 2016 to 55.24 on Jan 3, 2017, allowing CPI and PCE to finally break out.  But, all good things come to an end.  With PCE finally topping 2% and CPI at 2.7%, it was time to put the brakes on — lest investors begin to worry about stagflation.

And, that’s exactly what happened.  In March, the EIA reported gas prices increased 18.364% YoY versus February’s 32.48%.  This allowed CPI to drop a little: 2.4% versus 2.7% in February.  It was a little hard to swallow, given the actual price increases observed in the real world.  But, it was hardly surprising, given that many government economic data is made to order.

For any Kool-Aid loving believers in the veracity of government statistics, just know that the April YoY increase in gas prices came in at the same level.  The exact same level: 18.364%.In other words, inflation is being very carefully managed via the very careful management of gas prices — or at least the reporting of same.  This gives the Fed plenty of room to put the brakes on any further rate increases for the time being — should they so choose. And, it means that WTI’s drop through important support, yesterday, could be quite meaningful.

I’ll be watching RBOB like a hawk with today’s EIA inventory report.  It finally tagged our 1.5259 target from Mar 3 [see: What is the Fed Trying to Tell Us?]  And, like WTI, it is slipping below important support.We remain short from yesterday with our downside targets intact.

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