October PPI came in at 8% annually and 0.2% monthly versus expectations of 8.3% and 0.4%. Core PPI remained unchanged at 6.7%.
Futures popped up to our 4050 IH&S target on the news, but had already ramped over 40 points prior to the print.
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Seemingly on a rail, VIX’s bump took it only to the top of the falling red channel in place for over a month.
A failure to break out means ES can top its 361.8 Fib extension and reach its IH&S targets. 
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Due to a last minute flight change, today’s post will be short and sweet. VIX, which had broken back above the yellow trend line representing key support overnight, plunged 14% to make new lows.
Stocks had one of the biggest days in history, despite the fact that inflation remains quite high and the Fed is still withdrawing liquidity. 
It’s exactly what the Inverted Head & Shoulders pattern promised. But, it’s still irrational.
October CPI came in much lower than expected: +0.4% overall and 0.3% core versus 0.6% and 0.4% respectively. The YoY print was 7.7% overall (6.3% core) versus 7.9% expected and 8.2% for September. Despite the deceleration, CPI remains elevated.
Declines occurred in most categories except energy, where MoM increases remained stubbornly high.
Futures jumped over 100 points on the news after a significant drop yesterday.
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It was more of a red ripple than a red wave. So far, it appears that Republicans will hold a five seat majority in the House and might actually lose ground in the Senate. Futures are moderately lower.
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With the election today and CPI coming out Thursday, things are bound to start getting a little more volatile again.
VIX can’t stay in this channel forever…
Don’t forget to vote!
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More of the same…perhaps until CPI comes out on Thursday.
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Non-farm payrolls came in hotter than expected, a result that initially sent markets lower as it reinforces the Fed’s rate hike plans.
But of course…VIX.
So, instead of a selloff on news which is obviously bad for the market, futures spiked over 1.5% higher.
Think of all the market leaders which suffered massive declines after reporting horrid results or guidance, the 75 bps rate hike, Powell’s comments re the supposed Fed pivot — any of these events should have resulted in large declines. But, the algos have been able to protect the S&P 500 from any serious damage.
If you’re wondering how long this can go on, take a look at VIX’s 15-min chart. Ever since the SMA50 crossed above the SMA200 (a golden cross for VIX, ordinarily very bearish for stocks), it has been locked in a very precise falling channel – hence the market’s inability to react to bearish news.
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The market rallied sharply off a small change in the FOMC comment which seemed to imply a more dovish course of action. But, Powell soon dispelled that notion – exactly as we suspected he would.
“It’s very premature to think about or talk about pausing our rate hikes.”
Things turned ugly from there.
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The market is essentially unchanged from yesterday, with VIX in a position to make or break this rally unless the FOMC delivers a significant surprise.
We’ve seen this movie before: a sharp rally into a Fed meeting or CPI report that wipes out the put buyers and positions the market for a drop from a higher price level once the disappointing news is delivered.
There is widespread expectation of a 75 bps hike, but less agreement about whether the FOMC will be as dovish as the market’s latest rally would suggest.
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