Another day, another dearth of data. But, VIX is off 4% (so far) so the algos are only too happy to begin their run to the barn.

I got a good chuckle out of John Williams’ interview on CNBC this morning. While agreeing with me that the latest CPI data was hinky (my word, not his), he insists the Fed’s resumption of large scale treasury purchases is (obviously) definitely! not! QE!

“We are … obviously not doing QE, from my point of view, We’re not trying to change the 10-year, you know, term premium or something like that… The purchases are designed “to provide reserves to the banking system to meet the demand that the banks in our country and that operate here need in order to carry out their business.”

When I buy a new pair of jeans, the sales clerk doesn’t question whether I’m updating my wardrobe or a tornado ripped the pants from my body on the way to the store (a truly cataclysmic wardrobe malfunction.) Either way, they would ring up the sale, thus preserving our capitalist society for future generations.

Likewise, tossing another $500 billion annually into the money supply is quantitative easing and will stimulate the economy regardless of what you call it. Obviously.

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If ES can hold 6865, it will complete a small IH&S targeting 6970. SPX has one, too, completing at 6816 and targeting 6913. Keep in mind that today is a triple witching day, so volatility could be quite high (i.e. it ain’t over till it’s over.)

We should get existing home sales and UMich consumer sentiment at 10am.

VIX made it out of the falling purple channel (16.50) by the close yesterday, but it’s right back in it today. And, VX has a shot at a bullish 10/20 cross today, but it will depend on it remaining above 17.95ish.

It’s another moment of truth for USDJPY.  It broke out of the rising white channel on Nov 19 in order to halt a minor meltdown. Yen strengthening has ended many a rally [see: Yen Carry Trade.] Will it do it again?

It’s another day of stabilization for CL and RB…

…which has produced a small gap higher for TNX.

The approaching holidays remind us that it’s time to produce our 2025 Review and 2026 Forecast. We’ll take a break next week from daily posts (unless something really exciting goes down) and try to harness the remaining brain cells into producing something interesting, if not profound.

Stay tuned…

Inflation data was already going to be suspect enough, given that Trump only likes “good” data and that the Secretary of Labor was one of the very few people who hailed Trump’s decision to fire the head of Labor Statistics over her “bad” data.

Toss in the absence of October data due to the shutdown, and you’d need the faith of a village idiot to believe that CPI increased only 0.2% from Sept-Nov.

If the annual rate of 2.7% were accurate, it would be the first time in years that CPI increased during a period when YoY gas prices were increasing.

Nevertheless, the algos liked what they heard and didn’t hesitate to react as though Stephen Miran was the new Fed chair.

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Yet, it’s interesting that ES hasn’t broken out of the small, falling red channel. Either the downtrend is still intact and this is a nice big bump designed to shake loose a few bears, or TPTB are getting nervous.

The answer will likely depend on whether carbon-based analysts call BS on the sketchy data. I, for one, declare it so.

Ceteris paribus, VIX suggests there’s more downside. Keep on eye on VIX 16.56.

We’ll also keep a close eye on USDJPY. The BoJ has shown unusual restraint so far, but then again the Nikkei is doing just fine.

And, EURUSD still owes us a SMA200 backtest.It shapes up as a good chance of DXY surprising folks to the upside.

We’ve talked a lot about oil and gas this week. With the administration (and OPEC) declaring that inflation is over and rate cuts are urgently needed, it’s not surprising to see CL and RB bouncing today even as the 10Y is lower.

Of course, the 2s10s is still flashing a big, red warning sign.

GLTA

Futures continue to vacillate about the 50-day moving average as algos grapple with incomplete and contradictory economic data. According to the Census Bureau, retail sales for November will be released “at a later date.”

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Dropping through the SMA50 (6765 for SPX) would be problematic for the bulls.

VIX has reversed course again, retreating back below the purple channel it has broken out of several times over the past two months.

Currencies remain muted, with the euro and the yen both reversing yesterday’s moves and lending a bit of strength to the DXY.

Oil and gas have bounced after yesterday’s trouncing, with RB still technically broken down.

The 10Y is unch, leaving the 2s10s at 66 bps.

GLTA.

At 4.6%, November’s unemployment reached the highest level in 4 years while CPI has been locked in the same 2.4 – 3.0% range for 2 1/2 years. Had it not been for plunging oil and gas prices, it would also be at 4-yr highs.

“Inflationary slowdown” doesn’t exactly roll off the tongue. So, let’s call it what it is: stagflation. Will the stock market ever start to reflect the slowdown, or will it be content to bounce at the 50-day moving average again?

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SPX and ES have yet to make new highs, and still owe us a backtest.

Meanwhile, VIX is breaking out of the falling purple channel yet again.

Were it not for the falling DXY, we’d see a much bigger reaction in equities.

Oil and gas continue to wield dramatic influence on markets, with RB dipping back into the giant white channel while the 10Y remains stubbornly elevated.

CL has done the same, though it has Fibonacci support just below current levels at 53.87.

There have been many dips below the yellow channel top over the past several years.They typically don’t last very long. But, this time could be different as supply/demand is a secondary consideration.

We have long expected Trump’s OPEC+ and big oil pals to help with inflation by suppressing oil prices. But, at what point will they say enough is enough? Prices are below the level where it’s profitable to pump any new shale oil – a bonus for OPEC+ producers if they can discourage US production. But, Trump is doing all in his power to encourage US production.

One thing is clear: keeping CPI in the 3% range means oil & gas prices must remain at or below current levels – particularly as the effects of tariffs are increasing.

And, there’s a lot riding on CPI remaining below 3%, including the 2s10s which is pushing 3 1/2 year highs.

Stay tuned.

The Empire State Manufacturing Index came in at a dismal -3.9 versus expectations of +12.5 and prior +18.7. In traditional “bad news is good news” fashion, futures are up nicely…

…but have a lot of work to do to top recent highs.

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Bears are right to be concerned, however, as we’ve seen two H&S patterns busted and the continuation of a significant VIX smackdown.

The DXY continues to break down, courtesy of the euro. EURUSD has ignored the arrival of the SMA200 at its recent lows and has resumed its ascent toward our longstanding 1.2028 target.

CL and RB are awfully close to breaking down…

…which has done little to prevent the rise of the 10Y…

…of the steepening of the 2s10s. Of all the charts we watch, this is the more problematic for equities.  Our 10Y cycle chart suggests big drops in the 10Y in the next couple of months. This could be driven by many things: a collapse in oil/gas prices, the tariffs being struck down, an equity crash, etc. If the  2s10s reverses by 85 bps, the damage would be minor. Anything north of that, however, would likely unleash a significant downturn.

Stay tuned.

Futures are slightly lower as investors look forward to a slew of earnings announcements. This will be the 4th day that ES tests its .886 Fibonacci retracement.

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VIX continues to drive the bulk of the upside, nearing the Sep 2025 and Dec 2024 lows since breaking down in late Nov.

The other algo driver is the faltering DXY, with most of its weakness courtesy of the euro. Interestingly, the dollar’s weakness is in contrast with a resurgence in the 10Y…

…which is occurring despite continuing suppression of CL and RB.

But, the biggest risk to equities is still a steepening yield curve. At 62 bps, it’s sending a warning signal.  At anything north of, 67 bps, the year-end algo led rally could fizzle very quickly.

Stay tuned…

While the official vote tally included only three dissents (two who opposed any rate cuts and Trump’s sock puppet Stephen Miran) the dot plot illustrates a much greater degree of dissent. Six showed no interest in pushing through the additional rate cut the market is pricing in.

It was this realization that sent ES 92 points lower overnight. But, it was the QE (not so subtly renamed) of $40 billion/month which allowed stocks to recover much of those losses.

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Note that the initial spurt allowed ES to tag the .886 again. However, it also enabled ES to regain its 10-day moving average.

SPXSPX, on the other hand, came quite close to a double top and to the purple 1.618 extension it just missed on Oct 29.

COMP continues to look shaky, with a 16% slump still in the cards.

Keep an eye on the bond market however. The 10Y has gapped back down to its SMA20 and the 2s10s is pushing 60 bps. Would we really need half a trillion dollars in additional liquidity to provide adequate liquidity to a healthy bond market?

Stay tuned…

Once again, the global economy is in the hands of the 12 members of the FOMC who are arguably more divided in their thinking than at any time in the past 30 years. The problem is stagflation, The solution is elusive.

The market has pinned its hopes on a return to easier money, which will most certainly stoke higher inflation. The cure to inflation, however, is higher interest rates which usually means a recession.

While betting markets expect a rate cut, it’s hard to see how one would make much difference to the real economy. Consider the latest ADP employment data, where small businesses (under 50 employees) lost 120,000 jobs while larger ones gained 90,000 jobs.

How many of those smaller employers which were under so much pressure that they laid people off would, instead, hire additional employees if interest rates fell by 0.25%? Exactly.

Meanwhile, the market is flat at less than 1% below all-time highs.

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Stay tuned…

Futures are flat ahead of today’s important initial claims data and tomorrow’s PCE print. These will be among the most important data for the FOMC’s rate decision next week.

If the Fed is looking for weak jobs data, this morning’s print will be the last best chance to justify a rate cut.

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Currencies are still on track to go nowhere, with EURUSD’s SMA200 tag coming up… …and DXY still undecided.But, keep an eye on SI, which is coming up on our 60.20 target – important Fib resistance – while GC is still having trouble breaking above 4223.

Big downturns in December are very unusual. But, there’s a lot riding on the Fed’s upcoming rate decision.

I will be on the road tomorrow and early next week. So, I’ll only post if something unexpected occurs.

GLTA

Futures are up modestly after mixed economic data further muddles the rate cut picture.

ADP reported that 32,000 jobs disappeared (versus est +10,000) in November. But, the losses were much worse for small businesses which lost 120,000 jobs (the largest one-month decline since May 2020) compared to a gain of 90,000 jobs at large employers (those with over 50 employees.)

The rest of the data was mixed, with some prints arguing for a rate cut and others against one. That’s the story of this market, right?  At least to hear the administration tell it. The economy is doing great thanks to the administration’s masterful trade policies and the big beautiful bill. But, it’s doing so poorly that we desperately need a rate cut.

Never mind that a 25 bps rate cut wouldn’t do anything stop the bleeding at the smaller companies who would never see any savings from a cut nor at the larger companies which already enjoy low rates. Not would it stimulate the economy other than to inject additional capital into an already frothy equity market.

What the economy really needs is an actual breather, not a 3-week, 5% slump like we just saw but one which can reset financial conditions and reduce inflation and asset prices back to trend.

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We’ll come back to the economic data after looking at some charts.

Stocks remain on the brink of a breakout, meaning also that the rebound might have run its course.

Closing the gap at 6776.4 looks like a gimme, but it should concern bears that a 10/20 cross is imminent. VIX’s bearish tea leaves depend on its RSI holding recent lows.  At this point, there’s enough reason to believe it will – contributing to a risk off picture.

VX offers bears less hope as it makes lower lows.

Currencies continue to waffle, with DXY – currently my favorite canary – again testing its SMA50 while USDJPY fails to rebound off its backtest. If it breaks down, it’s going to be very difficult for equities to break out. The 10Y is testing support yet again.But, the bigger concern for bulls remains the risk of the 2s10s breaking out. It’s currently pushing 58 bps again.

continuing…