Futures are getting a boost from the old pre-open VIX dump this morning.

The question remains whether the various SMA200s are ready for a test.

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ES reached the very top end of our initial downside target yesterday, about 6 points above the 50-day moving average and 361.8 Fib extension. It tagged both overnight, leaving traders to wonder whether or not the 200-day is still in the picture.

There’s a very good chance that the release of FOMC minutes at 2pm ET will be the deciding factor.

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Futures are off sharply this morning, a common occurrence post-OPEX during a bear market.

Our price targets remain unchanged.

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Equities sold off sharply yesterday following a reminder that inflation hasn’t yet gone away. Between the MoM PPI print (0.7% vs 0.4% exp., 0.5% vs 0.3% core) and Fed presidents’ commentary, rates and the USD continued to rally – putting equities on the defensive.

The trend continues this morning, with futures off as much as 36 points overnight despite it being Feb options expiration day.

Meanwhile, the financial press has finally caught on to the notion that $1 trillion in credit card debt amidst rising rates and delinquencies might not be good for the economy. Will markets care?

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Futures are down modestly this morning as we approach options expiration Friday.

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The FOMC hawks should gain an edge with Lael Brainard’s departure to NEC, a factor not lost on the markets following yesterday’s MoM CPI beat and this morning’s Retail Sales beat (+3.0% vs +1.9% exp.) The 10Y continues to edge higher after breaking out last week.Note that SPX’s recent cycle high occurred on the very day its SMA50 topped its SMA200 – a Golden Cross that is supposed to usher in higher prices. The fact that it hasn’t means that this rally is just like so many others: bailing out the market makers who would otherwise be crushed under overly bearish options positioning.

Futures are off about as much……as the latest VIX smackdown will allow.

Stay frosty.

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January 2023 headline CPI came in at 6.41% versus 6.45% for December 2022. It increased 0.8% month-over-month, though this was reduced to 0.5% after the usual government massaging (aka seasonal adjustment.)

Core CPI also dropped – from 5.71% in December to 5.58% in January.  Despite all that massaging, some of the recent gains in energy prices made it into January’s data.But, a win’s a win, right? In this case, the data wasn’t far from most expectations, so the market is holding up so far.

Purely by coincidence (not) it seems that VIX was clobbered by 7% – over 14% from Friday’s highs.If you look closely, though, you’ll notice that VIX merely backtested the channel from which it broke out last Thursday – meaning that the latest rally might finally be over.

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With the 10Y having broken out, the 2Y threatening new highs and the 2s10s threatening new lows, should investors really be letting their guard down?

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After a sharp rally, stocks are back to flat for the month of February. More importantly, many of the factors driving the rally have reversed course.  Is it a case of the jitters ahead of Tuesday’s CPI report or something more?

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VIX broke out of its falling white channel from December and, so far at least, hasn’t fallen back in. It’s at least a glimmer of hope for the bears, as is the fact that a potential Inverted Head & Shoulders pattern hasn’t completed.

The other chart that should have bulls a little on edge is the 10Y. After bouncing nicely at our 200-day MA target, it’s on the brink of a breakout.

Has stocks’ bear market bounce finally played out?

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