Notice anything interesting in the chart below?

The large red candles show big drops in VX, the VIX futures contracts. Notice there are 4 of them – one for each of the last three Mondays as well as today. Since algos are well trained to respond to big drops in VIX, and VIX is easily manipulable, this suggests that the start of each of the past four weeks has been manipulated higher.

It’s easier to manage prices higher in the Sunday night low-volume environment. But, once the latest positive pronouncement from the White House fades and heavy selling pressure resumes, these bumps have quickly turned into slumps. Chase them at your own peril.

Today is no exception. Futures are up over 40 points on what is really very bad news: the Iran-backed Houthis have joined the war and shipping through the Bab el-Mandeb Strait, a key channel linking the Gulf of Aden to the Red Sea, could soon be shut down.

Currencies continue to hold on for dear life, with DXY still bumping up against 100.

And, CL pushing to fresh highs.

The 10Y is all over the map, undecided between responding to spiraling inflation or the nearly 10% decline in stocks. 

Stay tuned…

There are continuing rumors of a peace deal in the Middle East, but no one with any credibility can say exactly what the deal is or even who in Iran is negotiating it. Iran says there is no deal, and in fact there are no negotiations going on. So, color me skeptical.

There was that big drop on Mar 23, but otherwise oil has remained range bound. No lower lows over the past two sessions.

Nevertheless, Trump will likely continue touting the deal as long as it pumps the Dow.

Meanwhile, 2s10s are down to 45 bps and targeting 40 bps – supporting the stagnation half of the stagflation argument.

Just a reminder, there will be no posts on Thursday or Friday as I will be traveling.

GLTA

By now it’s obvious to most that Trump was at least exaggerating (the charitable term) when he posted that a deal was being hammered out with Iran.

“…VERY GOOD AND PRODUCTIVE CONVERSATIONS REGARDING A COMPLETE AND TOTAL RESOLUTION OF OUR HOSTILITIES IN THE MIDDLE EAST.”

Trump has always had a very tenuous relationship with the truth. As the neurons fray, however, it’s becoming easier and easier to tell, like those spam emails promising millions. In this case, it was the phrase “complete and total resolution.” No president in their right mind would use that phrase until a deal was done. He got what he wanted, though, a substantial drop in oil prices (and rally in stocks) which was the target of a $580 million wager moments before he announced it.

ES took a run at its SMA200, but didn’t come close to holding it and is about 150 points lower at this point.

The dollar continues to strengthen as the fear trade takes hold and rising inflation drives interest rates higher. But it has yet to signal a panic. Time will tell.

Oil and gas are both higher, strong 3-4% bounces off yesterday’s lows, contributing to rising interest rates.

Stay tuned…

Back in March 2020, we watched a phenomenal development unfold in the Dow Jones Industrial Average. As the Dow plunged with each of Trump’s untruthful, nonsensical and totally unscientific tweets about COVID, we wondered just how bad things could get. We put a big fat target at 18,974, which was a channel bottom, a key Fibonacci level, and just above where the Dow was trading when Trump was elected in 2016.

Sure enough, that’s exactly where the Dow dropped to before beginning a stunning reversal that saw it making new highs by November.

Many of my more conventional contemporaries poo-pooed the idea, but it was pretty obvious to any chartist. Trump et al couldn’t let the Dow drop below that price level because, at the end of the day, the Dow is Trump’s most important internal score card. And, just like the one he uses when golfing, this one involved a big kick back into the fairway whilst no one was looking.

Why bring it up again this morning? Because a couple of hours ago, in the midst of a huge military conflagration, Trump took time to put in a call to Joe Kernan at CNBC.  Why? He felt it was really, really important that we know that he was having really, really productive conversations with the Iranians and that he was postponing the attack on Iran’s power plants (potentially including a nuclear reactor, which would have been a war crime if that even matters any more.)

Purely by coincidence, the news was shared precisely when the DJIA futures had plunged to the December 2025 highs – the ones that were established before Trump went nuts with DOGE,  tariffs, attacking Venezuela and Iran, ICE shooting Americans in the streets, talking about invading Greenland, etc.

So, instead of opening below 45,073 on the heels of a 700-point loss – which it would surely have done – the Dow futures will open at a gain. Again, purely by coincidence, it will avoid being any lower than where it was after Trump was reelected. Isn’t it weird that this all happened when the market was closed and easily manipulated? Isn’t it also weird that Trump is allowing 5 days – in other words, after Friday afternoon’s close  – to confirm whether there’s any actual good news?

Some radical left commie TDS detractors might say that Trump always chickens out, that he can’t bear the embarrassment of the market dropping below where it was when he was elected. He needed an off-ramp after such a colossal cock-up and he’s just trying to stay alive until after the mid-terms which could see him impeached.

I say that’s silly. Random walks, great fundamentals, greatest president since, well, 2024! So what if the timing is a little suspicious?

Life’s just funny that way.

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.