It’s been a while since we last updated natural gas [see: Mar 28 Update.].  At the time, NG had bounced up to 1.852 after recently testing the 1999 lows.  I wrote that, despite strong selling pressure and upcoming seasonal influences…

…there’s strong support for NG, and TPTB might well have made up their minds that it WILL NOT GO any lower.

I placed an upside target at 2.058 — the top of the falling gray channel NG had been in since 2014 — and we waited to see if it would break out or break down.  We didn’t have long to wait.

The following day, NG gapped up above a key channel midline.  Six days later, it tagged the red target (2.074), consolidated for two weeks, then broke out of the falling channel for good.Just this month, it reached 3.777 — more than doubling its Mar 28 price in little more than 8 months.  So, it’s an excellent time to update the charts.  Is NG running out of juice, or is there more left in the tank?

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VIX just reached a 10 handle, something it hasn’t done since Aug 5, 2015 — shortly before SPX fell off a 245-pt cliff.

If you were to ask me how low VIX can go, I’d have to answer “as low as it needs to in order to keep stocks melting up.”

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Pity the poor guys working the VIX button this holiday season.  They’ve had no rest for the past few days, and are unlikely to have any until after the new year dawns.

Yesterday was a prime example.  ES made several attempts to break down before the open, only to be undone by a 5% decline in this “fear indicator,” most of which occurred in the first minute of trading.  There were other attempts by SPX during the session, each of which was quickly dispatched by VIX hitting new lows.

It wasn’t until CL finally got the message and started ramping higher that VIX finally took a break and popped up just high enough to suck in some bears before the close.  After the close, VIX plummeted again, ensuring another break out this morning.

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Today, we get a chance to find out whether or not our analog from several months ago is still on track.  It’s shaping up nicely so far, with USDJPY and CL both coming down off their recent highs and the futures sitting just barely in the green.

Analogs are funny things.  Since we first announced this one on Aug 3, it has taken lots of twists and turns.  I abandoned it twice, only to realize it had merely shifted due to some of the exogenous events along the way.

But, overall, it has provided great insight as to what to expect, even as the trading environment continues to be very difficult.

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It’s quad-witching Friday, which means we’ll likely see plenty of swings and plenty of head fakes in the light volume ahead.  Our analog remains on track, with no change in our outlook.

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Thanks to docjay for pointing out that gold is nearing the downside target from our Dec 5 Update.  A word of caution, though: GC is currently testing an important internal TL of support even as DX is testing important overhead resistance.

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Turns out the “Trump rally” wasn’t impervious to higher rates after all.  Our analog is on track, with further drops to come after a day or two of chop.  Our downside targets remain unchanged.

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It just dawned on the futures that there’s a rate rise on tap at a very suboptimal time.

PPI just came in at 0.4% — much hotter than the 0.1 – 0.2 expected.  Yet retail sales and industrial production were much worse than expected.  It’s another reminder that we’re likely heading down a path to stagflation.

And, we still have the EIA inventory report (yesterday’s API report was horrid) and a rate hike ahead of us.

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Another day, another overnight ramp job in the futures market.  They’re persistent, I’ll give them that.

Oil, which reversed at a logical spot yesterday, failing to hold its own Sunday night special, has rallied just enough to put ES back within striking distance of Sunday’s highs. Thus, SPX has a chance to reach or even top yesterday’s highs on the open — which is the whole idea.

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More news in the oil complex over the weekend as the non-OPEC players threw in with their OPEC counterparts and pledged production cuts which, like OPEC’s, will likely not help in the long run.  In fact, they just might find the cure is worse than the disease.

Sure, it was enough to drive prices higher in the here and now.

But, stocks have shrugged it off.  As is our central thesis, higher oil prices might be good for producers, but it’s a negative for central bankers who — tasked with balancing the inflation/interest rate scales — will have a difficult time preserving stock prices at the same time.

Rising rates in conjunction with growth and reasonable debt levels — no problem.  But, that ship sailed about $15 trillion ago.

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