In a repeat of the most effective algo move of the past 10+ years, VIX broke down following the Fed’s no-news rate decision and press conference yesterday.
As always, this allowed equities to leapfrog an area of stubborn overhead resistance. 
continued for members…
ES now has a clear path to its 1.272 at 5442. 
The move was more stark with SPX, which had stumbled after reaching its 1.272 extension.
It clears the path to the purple 2.618 and, after that, to the white 1.618 at 5638 and IH&S target at 5727. 
Currencies remain all-in, with EURUSD still “broken out” since its abrupt reversal 5 weeks ago…
…and USDJPY nipping at new all-time highs.
The only real risk from a charting standpoint remain oil/gas, which have pushed the 10Y back above its SMA200, well off December’s lows.
One of my favorite charts is the cycle chart for the 10Y. It’s excellent at showing what should happen and provides an excellent alarm when the intended outcome doesn’t occur. The cycle lows occur every 53 months or so, and have accurately forecast 4 of the past 6 periodic lows.
One miss was in 2008 when, in December, the GFC drove 10Y rates even lower than the lows made in January – which would have been 4 months later than the model suggested. The lows in 2012 were also 4 months later than the model suggested.
The lows in 2020 came a little earlier than the cycle suggested. But, you have to remember that the 10Y reached an all-time low of 0.39% in the depths of the pandemic crash. If it had fallen to the bottom of the large yellow channel on schedule, it would have yielded -0.20%. We can only speculate as to how destructive that would have been for global financial markets.
The next cycle low is forecast to be in early 2025, and it’s worth noting that the actual lows have been highly correlated with stock market lows. So, we’re presumably in a period of relative safety at this time, with a significant equity selloff coming between October 2024 and March 2025.
We’ve talked often about the breakout from the falling yellow channel in 2022. The initial push took yields up to the yellow .618 at 43.69 (also the purple .786 at 42.64.) Following a pullback to 32.53, TNX pushed above the yellow .707 and purple .886 to 49.97 and pulled back to 37.85.
This second pullback was bigger than the first, suggesting that it is the cycle high. But, this is by no means a certainty – only a likelihood. A sharp rise in the price of oil/gas, for instance, could completely confound the Fed’s inflation-fighting efforts and push the 10Y up to the yellow .786 at 54.48 in September.
As I wrote months ago, this complicates an already colossal battle between Biden and Trump. It’s obvious that OPEC+ would rather see Trump in the White House. How aggressively might they raise prices in order to achieve that goal? Is there anything the Biden administration could do to combat higher prices?
Aside from Trump’s legal troubles, I believe the most important economic/political issue that lies ahead. And, I have yet to hear anyone else talking about it.
Inspired by the above, I’m going to start working on my next Big Picture post this afternoon and hope to have it ready by Monday morning. As such, I’ll skip tomorrow’s daily post unless something totally unexpected occurs.
GLTA.