It’s no surprise that the FOMC is standing pat on interest rates. This was widely expected. It was interesting, however, to hear the mild-mannered Powell, when asked about his future at the Fed, stand his ground. Trump has been attacking him for months, the latest effort being a Justice Department investigation over the renovation of the Fed’s headquarters. Powell has publicly stated the obvious, that the investigation is just another of Trump’s efforts to strong-arm Powell into cutting interest rates.

Lawmakers from both parties have said they would block Trump’s new Fed Chair from being confirmed until the investigation is closed. Yesterday, Powell concurred in no uncertain terms:

“I have no intention of leaving the board until the investigation is well and truly over, with transparency and finality.”

So if Trump wants Kevin Warsh confirmed, he’d best end the investigation that a federal judge recently found was motivated by political animus. The finding angered Trump so much that he refused to drop the investigation, even if it means Warsh won’t be seated (and Trump won’t get to direct monetary policy) any time soon.

Powell went on to explain that he hasn’t made up his mind whether to continue as a Fed governor after his chairmanship ends, stating that he would decide “based on what I think is best for our institution and the people we serve.” In other words, he could remain a thorn in Trump’s side for most of Trump’s presidency.

Needless to say, this would be a net positive for the economy. Warsh has likely pledged to Trump that he’ll cut interest rates after confirmed, even though Trump’s trade wars and actual wars have sent inflation soaring. A rate cut in the midst of high inflation is the last thing the economy needs.

All the major indices fell on the day, with SPX coming within 6 points of our SMA200 target.

With futures currently off 25 points, SPX should have no trouble testing the key support, currently at 6615.7. A bounce into the quarter end over the next 9 sessions wouldn’t surprise anyone, with the SMA50 and TL at about 6869 a key level of resistance.

WTI has been hammered every time it approaches 100 and VIX remains under control – though Brent hit 119 earlier after Israel bombed an Iranian gas field and Iran replied by attacking  the world’s biggest liquefied-natural-gas facility in Qatar.

The bigger risk to the markets is Trump’s seeming inability to refrain from committing unforced errors – the greatest, of course, being tearing up the JCPOA years ago (because it was negotiated by Obama) and now starting an unnecessary war that no major ally other than Israel supports.

Stay tuned.

 

 

 

 

 

Algos were understandably aghast at the Feb PPI print: 0.7% headline (3.4% YoY) and 0.5% core. That little after-hours channel breakout is no more.

 

There’s so much for Powell to talk about in today’s press conference: from the (still) growing risk of stagflation to the fact that the US has been relegated to the corner of the cafeteria where no cool kids sit.

As we discussed at length in the Year Ahead 2026 post [HERE], the divergence endemic to our K-shaped economy is problematic in many ways – not the least of which being the Fed reaction function it drives. Ordinarily, the FOMC would reverse course from a rising rate regime to one where lower rates can begin to address excessive inequities.

They can’t do that when inflation is as high as it currently is – even if the inflation represents an unforced error brought on by the president’s colossal strategic errors. Will Powell touch on this in the Q&A? Will he remain with the Fed after his tenure as Chairman concludes? Will Trump insult him after the press conference no matter what Powell says?

As always, we’ll have lots more to say after the presser.

continuing…

 

Futures have made their way back to the top of the small, falling red channel in advance of tomorrow’s FOMC rate decision and commentary.

 

It’s mostly VX at work, spurring the algos to do the Fed’s work.

Certainly nothing has happened on the global economic or geopolitical front to justify a rally.

Yes, the administration is hammering oil futures to keep them below $100/bbl. But, our allies – perhaps recalling Trump’s constant criticism and the higher tariffs of this past year – have mostly declined to rescue him from the dumpster fire he started. The Strait of Hormuz remains closed and the cost is mounting.

FWIW, in another day or two SPX’s SMA200 will have risen to the level of the Mar 13 lows – meaning SPX could bounce at legit support without making new lows.

Stay tuned.

I spent the weekend thinking about the war and the FOMC rate decision due out on Wednesday. We talk a lot about the K-shaped economy and how it typically corrects as Fed policy attempts to reset it from what is deemed to be excessive values.  It’s currently at all-time highs, so it would follow that the Fed takes corrective action. In the past, this has consisted of a cycle of rate hikes which plateau and are then followed by rate cuts which initially benefit the “have-nots”, but later mostly benefit the “haves.”

We’ve seen this cycle repeat 8 times in a row since the 1970s. But, we’ve never had a real estate developer who is so focused on his and his family’s personal wealth sitting in the oval office. CRE developers love high inflation, as long as it doesn’t throw the economy into a recession or drive cap rates too high. The Trump organization is heavily concentrated in the property types that benefit most from inflation: luxury hotels, golf resorts and high-end residential. So, optimizing for personal wealth would mean 3-5% inflation is just fine.

Of course, if inflation is too high it could impact his odds of losing the House and Senate in the midterms and mean being impeached for a 3d time. So, the Iran war could benefit him by giving voters a boogey man on which to blame higher inflation. If it’s transitory it’s no problem, right? Likewise, his tariff poicy – whatever its stated rationale – is inflationary. It is also at odds with the pressure he’s applying to the Fed to lower rates. A developer-friendly inflation rate of 3-4% and a low-rate environment would be the ideal combination for his asset base and his donors.

Re the K-shaped divergence, the irony is almost structural: the dynamics that drive the divergence — asset price inflation, real wage stagnation for the bottom half, concentration of wealth in hard assets and equities — are precisely the dynamics that benefit him the most. Rising asset values lift his portfolio. The wage pressure and purchasing power erosion that squeeze the lower half of the K don’t touch him, his family, or most of his donor base. There’s no feedback mechanism other than elections that would make him feel the problem. Bonus: the war has pushed the Epstein files off the front page.

The deeper irony is that his MAGA base includes a substantial working-class population that is on the wrong side of that K — people whose real wages have been pressured, whose asset ownership is minimal, and who are genuinely hurt by the kind of inflation that increases Trump’s wealth. His rhetorical solution has been to redirect that economic anxiety toward cultural grievance and trade policy framing — tariffs as a populist instrument that signals “fighting for you” even though the actual incidence of tariff costs falls disproportionately on lower-income consumers through higher goods prices.

We won’t know exactly how Warsh fits into the above scenario until he’s running the show. But, it will be very interesting to watch.

 

Core PCE was reported 3.1% YoY (0,4% MoM) higher for January – a print inconsistent with a Fed rate cut. At the same time, the second estimate Q4 GDP cratered to 0.7% from the first estimate of 1.4%. All these data applied to the economy prior to the invasion of Iraq and 20% higher gas prices. From Briefing.com:

Futures maintained their overnight ramp, with multiple downward sloping channels implying TPTB’s blessing and suggestive of a SPX SMA200 tag.

Note that the yield curve is breaking down below the white TL from July 2023. While not as significant as a breakout, it almost always leads to a significant correction.

Our outlook remains unchanged.

 

Futures are down sharply again on the oil market’s underwhelming reaction to the strategic petroleum reserve release gimmick.

SPX’s SMA200 tag remains the best level of potential support. It’s even more appealing now that it’s up to the nice round 6600.

Volatility remains elevated.

 

Traders/algos are basically saying that Trump/Hegseth/Wright don’t know what they’re doing when it comes to the little excursion, economics or politics.

The problem with having a cabinet full of lackeys is that no one was able to convince Trump that attacking Iran was a bad idea. In his previous administration, someone might have reasoned with him to at least wait until after the midterms. Now we’re in over our heads, with no clear exit strategy and flag-draped caskets and the grieving mothers of hundreds of innocent civilians on the nightly news – not to mention 20% higher gas prices at the pump. Unless something changes very quickly, Trump’s panic over the Epstein headlines may well get him impeached a third time.

We already had ample reason to disbelieve the official CPI data – considering what happens when someone reports economic data Trump doesn’t like. So, February’s 2.4% CPI with its laughable 0.5% YoY new vehicles data point (actually 3.4% per industry sources) was already meaningless. The Iran war has made it even more so: the -5.6% YoY gas prices cited in the CPI report would instead by +13.5% at today’s prices. Guess what this will do to even the perennially understated CPI?

Futures have been all over the map this morning as the algos are trying to come to grips with the growing disaster in the Middle East which is unlikely to be mitigated by SPR release gimmickry.

SPX still owes us a tag of its SMA200. So, any bounce between now and the end of Q1 shouldn’t last.

 

 *  *  *

I’m a little sore from overdoing my first extended hike following last week’s surgery. Then I think about my nephew Will, who is competing in his first Pierra Menta ski mountaineering race this week. Considered the most grueling such race in the world, it spans 4 days and involves over 30,000 feet of vertical gain in the French alps. Footage can be seen HERE. There’s an overview of the insanely difficult course at the 38:20 mark.

Despite Trump’s assurances that the US air campaign would result in a swift collapse to Iran’s government and military, the war has dragged in multiple regional players, resulting in a dramatic surge in oil prices.

CL easily reached our 93.16 and 101.65 price targets…

…and RB easily reached the 2.57 breakout threshold.

The Straits of Hormuz are effectively closed. Any attempts to bring tankers through – with or without US protection or insurance –  will make things worse. All it would take is one sunken ship to constitute a long-lasting blockade. With tankers and storage facilities full, oil producers are shutting down production and capping wells – meaning that even after the war is over, prices will remain elevated.

As we outlined last week [see: More of the Same], ES tagged its SMA200 – though in the after hours, to prevent those pesky retail options traders from cashing in. TPTB wasn’t able to stem the losses until facing a lower low.

The rescue effort was clumsy, though, as SPX never reached its SMA200, now at 6586 – quite close to the .886 Fib at 6576.68.

This likely means another leg down today, before any potential end-of-quarter bounce. After that, however, the charts still point to lower lows.

In today’s NY Times Dealbook, Andrew Ross Sorkin asks: “Does the S&P 500 now dictate U.S. foreign policy?” Of course it does (though Trump prefers the DJIA – bigger numbers.)  Making the Dow Higher is #1 on Trump’s to do list. It’s his own internal scorecard. And, like his golf score card, it is a record of his attempts to “win” by cheating.

He’s not the only president to have ever cared about stock prices. But, he’s the most obsessed and the most obvious about it. Needless to say, higher stock prices are good for the economy, to a point. They support healthy capital formation and, all else being equal, contribute to a wealth effect that buoys consumer confidence and helps folks retire.

But, stock prices that depart from the fundamentals raise the risk of severe downdrafts – the sort that we discussed in our 2026 Forecast. We saw this in the dot com bubble of 2000-2003, the Great Financial Crisis of 2007-2009, and the COVID crash in 2020-2021. I don’t know what they’ll call this one. But, like the others, it represents an avoidable unforced error.

Trump was so determined to drive the Dow to new highs that he harangued the Fed, abandoned our allies, made unwise deals with Russia, Israel and OPEC, and attacked Iran. He reasoned that if interest rates were lower, the Dow would keep rising – usually a safe bet. But, with stocks already at nosebleed levels, the market balked. So did the Fed, which regards inflation which has remained stubbornly above target as incompatible with rate cuts.

Trump, who has likely never passed a marshmallow test, was not content to wait for Powell and Cook to be ousted. He also refued to let the economic reporting apparatus of the US government announce that we were in a slowdown that justified a rate cut. The only lever he had available, then, was to try and force inflation lower by lowering the price of oil.

When OPEC drew the line at $55/bbl, he forced the issue by attacking Venezuela, kidnapping its president, and turning it into a “major oil supplier.”  Analysts called bullshit, as Venezuela’s oil is heavy, dirty and costly to refine. And, it is only about 1% of the world’s total oil production. The price of WTI didn’t drop. It didn’t even budge. Trump needed a bigger boat – or so he reasoned.

The challenge was finding a big oil producer who could be convinced to produce more. He had pissed off Canada (6%.) The rest were Saudi Arabia (11%), Russia (11%), China (5%), Iraq (4%), Brazil (4%), UAE (4%), Iran (4%) and Kuwait 3%.)  Like Venezuela, Russia and Iran were under sanctions. Lifting the sanctions on those regimes was problematic, as they had earned their stripes. Though, Trump waived certain oil-related sanctions on Russia yesterday – the same day we found out that Russia has been providing intelligence to Iran on the location of US forces.

But, if he could quickly and cheaply assume control of the Iranian spigot, he could pump up the volume, flood the market, lower prices, get inflation down to 2%, get Fed Funds down to 2%, and get the Dow up to 60,000!

If only it were that easy…

 

 

Higher oil prices, higher VIX, lower stock prices, and additional Trump rants that seem to preclude a speedy end to the war.

“I don’t have any concern about [higher oil prices]…”
“There will be no deal with Iran except UNCONDITIONAL SURRENDER…”
“I have to be involved in the appointment, like with Delcy [Rodriguez] in Venezuela…”
“MAKE IRAN GREAT AGAIN (MIGA!)”

ES has almost reached our 6680 target, egged on by…

…oil prices that continue to break out…

…and rising vol.

As we’ve discussed many times, SPX’s RSI chart confirms what the Fibonacci ratios have told us: we’re nearing an important inflection point. A bounce at the SMA200 would be completely normal. A drop through it would point to potentially much lower prices.

The most likely path at this point is probably a bounce at the SMA200 into the end of March (end of Q1 meltup) followed by another drop to 6624 around April 24. But, it Trump et al don’t lay off with the warmongering, we could get there (and lower) much sooner.

Stay tuned…

The expanding Iran War has driven oil prices up beyond another trend line of resistance, adding to the market’s angst and increasing the odds of an equity breakdown. The yellow TL from 2022 has been broken numerous times, but sharp, swift pullbacks always followed.

A newer line of resistance, the white dotted trendline, began to hold sway in July 2024. It has now been broken as well. Depending on whom you ask, this breakout could be more long lasting. The likely net result: higher inflation and much lower odds of those FOMC rate cuts that stocks have been banking on.

There’s a differently-shaped pattern in RB that also shows a breakout. And, frankly, the transmission mechanism is stronger between YoY gas price changes and inflation than it is oil prices.

Either the administration was wildly overoptimistic about the pace of the war or they just decided not to worry about inflation/interest rates/stock prices. Since there is zero chance of the latter, we’ll assume that they badly miscalculated the speed and ease with which they could take over Iran’s oil fields. If CL remains above 75, don’t look for stocks to recover any time soon.

We’ve been looking to ES’ 200-day moving average for the past week or so, anticipating that ES might be allowed a tag once it reached a logical turning point. That point is now, here at the .786 Fib. It would form a nice little Gartley pattern and would give the bulls a reason to breath a sigh of relief.

If the SMA200 doesn’t hold however – say in the wake of persistently high oil prices – there are many much lower targets on which to focus.

SPX’s RSI certainly suggests much lower prices. It has been making lower highs since July 2025, a remarkable span of negative divergence that has accelerated since September and should pay off handsomely for bears.

I’d like to thank those who have sent notes of encouragement over these past few weeks. I have been experiencing daily headaches for over a year. They were accompanied by vision changes, hearing changes, fatigue, and intracranial hypotension which caused my brain to literally sag within my skull. I was fortunate to connect with one of the world’s top experts in cerebrospinal fluid leaks who surgically repaired what was ultimately diagnosed as a venous fistula. The improvement in symptoms has been dramatic. Although I am very sore from spine surgery, I am looking forward to getting back to normal. Thank you for your patience and your support.

I will be working over the next few days to finish the work on the website’s membership management system. So, this would be a good time to renew or update your memberships before everything is back behind a paywall.

Stay tuned…