At 1.186 million, initial claims came in well below estimates of 1.46 million. Futures rallied on the news, but are still slightly in the red after breaking below trend overnight.
All eyes are on tomorrow’s nonfarm payroll data which Trump has already characterized as “big jobs numbers.” Will it be enough? At what point will the market run out of patience with Congress?
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ES has reached the top of the falling white channel we added a couple of months ago. At 76 points below all-time highs, a 2.2% move higher would make quite a statement about the integrity of the S&P 500 – essentially that a connection between equity prices and macroeconomic conditions is no longer a reality, nor even a consideration in investing. Imagine future FOMC press conferences and the derision that pretenses to the contrary would invite.
Is the Fed ready to cross the Rubicon? Or, could this finally be the end of the road?
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Aside from the higher highs which busted ES’ H&S Pattern yesterday, not much has changed. Congress and the Trump administration are still fiddling while America burns, failing to come up with a package that could keep millions of businesses and families from slipping into bankruptcy and foreclosure.
Futures are off about 15 points, driven primarily by weakness in oil and gas and another gap lower in the 10Y.
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Head & Shoulders patterns are fairly reliable harbingers of downturns. The one which has been setting up on ES for the past couple of weeks promised a 100+ point plunge.
It was just now busted by none other than VIX – the algos’ favorite signal – which caused ES’ right shoulder to marginally (by 1.50 points) exceed the head. 
With the pattern now officially busted, there’s no downside risk, right? If Congress’ failure to reach a stimulus compromise and foreclosure protection doesn’t matter, then sure. No more risk.
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Yes, it was impressive. AAPL, FB, GOOGL and AMZN delivered big time. Yet, AMZN, the one that was best positioned to clean up, hasn’t yet broken above a key Fib level, let alone the top of the 20-year old channel which marked the July 13 reversal.
If it does, fine, bears should prepare for a long, long winter. But, until it does, this remains a dangerous moment for the recovery’s poster child.
While we’re at it, did anyone notice that after tagging yesterday’s downside target, futures bounced only to the .886 Fib? Or, that SPX is poised to pop and drop at its own .886 Fib?
Again, not a breakout.
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Will the addition of another “thinking about” keep stocks aloft until the next FOMC meeting? Futures aren’t looking so hot, perhaps because WTI has now joined RBOB in breaking trend, 10Y yields have gapped lower, and VIX broke out of its falling wedge. The algos are not happy.
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The holding pattern continues. Futures levitated overnight to the gently falling 10-day moving average yet again. 
And, yet again, VIX provided the precise guidance the algos required.
The longer this goes on, the more we begin to resemble the Nikkei, with preset moves prescribed by a central bank: support and resistance predetermined by committee. It makes charting easier, but it strains credulity to even call it a market.
Nowhere is this as obvious as in WTI, which has traded in an ever narrowing range since its miraculous recovery in April and May. Note the tilting trend lines of support. We place downside targets on the chart to represent not our actual expectations, but to indicate where prices might drop if the bankers were to lose control.
RBOB futures have done the exact same thing, also ignoring such trivial issues as supply and demand or geopolitical developments. 
Fortunately, the FOMC concludes their meeting today and the motivation for the current holding pattern will pass. Until next time…
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How would you like to be on the FOMC, saddled with the messaging job from hell? You want to boost consumer confidence and business activity, but not so much that the markets get a whiff of inflation and interest rates shoot higher as debt spirals out of control.
You want a strong dollar to stave off inflation, but can’t convince the currency markets that the US, with its failed pandemic response, is deserving. You want to avoid another equity meltdown, but pretty much everyone now recognizes that the markets have lost all connection with reality as speculators bid up already overpriced securities.
No thanks. If there’s an easy way out for the Fed, I can’t see it. So, it’s one day at a time, one stick save at a time, hoping that a vaccine will come along and restore at least the semblance of integrity.
For what it’s worth, futures are back below their 10-day moving average this morning. 
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In the latest 30-pt ramp job, ES ran out of juice at a backtest of its 10-day moving average – not exactly a bullish move. This would leave SPX with a backtest of its own, suggestive of the additional downside Friday’s session left on the table.
It also suggests a nice little Head & Shoulders pattern that could finally get a correction rolling. Should we be concerned about the breakdown in the dollar and breakout in gold? Or is the yen’s breakdown the more serious threat to stocks?
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In yesterday’s A Failure to Capitulate we chided the market for its failure to make good on the downturn signaled by our numerous bearish charts. For once, the market gods were listening. Futures are off 85 points from recent highs and teasing us with the notion of a — brace yourself — drop below the 10-day moving average. 
While we await the next breathless vaccine announcement or congressional handout, note that VIX popped up to our first upside target…
…and USDJPY is finally breaking down.
Don’t look now, but AAPL is even making nice progress following its Fib tag. 
Is there more where that came from?
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