Futures are moderately higher following yesterday’s failed attempt to notch higher highs.

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The falling white channel is still susceptible to a breakout, particularly in the lead up to an FOMC decision – not to mention the usually bullish year-end gallop to the barn.

Note that the 1.272 extension of the recent pullback is right on top of the 3.618 extension of the 2020-2023 correction (though the SMA200 is sneaking up on the December 2024 highs.)

Currencies continue where they left off yesterday, with USDJPY getting a slight bounce off yesterday’s backtest. DXY is flat.

Futures are off by about 0.60% as December gets under way.

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The strong month-end rally opens up the possibility of a breadth thrust.

But, SPX’s RSI will need to reverse first.

VIX and VX are again at cross purposes, with VIX back to broken out status.As we’ve discussed many times, Japan is facing very problematic inflation which, in turn, could unravel the very beneficial yen carry trade. The devaluation of the yen was predictable, with USDJPY rallying from 139 in April to 158 about a week ago.

Ueda’s comments last night suggest the BoJ is considering a rate hike in the Dec 18-19 meeting which, of course, strengthened the yen nicely.

The EURUSD has been less predictable. The pullback to the SMA200 at the intersection of the channel midline never materialized but, instead, has yielded a well-managed shuffle  which is patiently awaiting the arrival of the rising SMA200.

The DXY is following suit – breaking back below its SMA200 after the brief breakout. Keep an eye on 98.97 as we approach the FOMC decision on Dec 10.

There’s no question that Trump will select a very dovish Fed chair to replace Powell. NEC director Kevin Hassett is all but certain to get the nod – which might result in some of the FOMC members who don’t get the nod acting a little more responsibly with respect to US inflation.

CL and RB are both seemingly chomping at the bit, no doubt being suppressed by our Saudi friends in order to facilitate Trump’s agenda. It comes with a hefty price tag: America’s self respect. The fealty shown to MBS during his recent state visit was beyond the pale.

Meanwhile, the 10yr jumped back above the large white channel midline, suggesting that the momentary dip below 4% might have been a headfake. The charts still suggest a drop to as low as 3.25% in the next few months, particularly if equities hit the wall.

GLTA

Futures are modestly higher despite VIX being crushed by a ridiculous 8%. It’s gotten to the point where there’s not even any effort to mask the obvious manipulation.

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We have to go to the VX futures to see the true state of affairs – a backtest of the large falling purple channel from Jan 2022. This isn’t to say that the channel won’t be violated again, like it was starting on May 12.

Members will recall that Monday, May 12 was the day that Scott Bessent went on CNBC (before the open, of course) to surprise markets with the news that tariffs on China would be slashed from 125% to 10%.

VIX plunged 17% (back below its 200-day moving average of course) and SPX soared 3.25%, gapping back above its 200-day moving average. This followed the FOMC decision on May 7 not to cut interest rates. It should come as no surprise that the meeting with the Chinese was announced on (drumroll please) May 7 as SPX was pulling back from its .618 Fibonacci level.

We’ll be doing a little site maintenance over the next few days, but this situation was too absurd not to mention.

Wishing everyone a wonderful Thanksgiving holiday!

Futures are up modestly after another vol crush ahead of the Thanksgiving holiday.

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Futures are moderately higher ahead of the open and important economic data later this week.

Wednesday’s PCE print is the only official inflation data we’ll see prior to the next FOMC decision on Dec 10.

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Futures reached our next downside target yesterday, though two weeks later than our forecast [see: Not So Fast…] Admittedly, we heard from many naysayers back in October when we posted this chart.

And, this morning…Days like yesterday, where a 120 point overnight rally turned into a 160 point selloff, are enough to scare anybody. But, especially NY Fed President Williams who took time out of his busy schedule to remind algos that there room for “further adjustments” to interest rates.

It reminds us of James Bullard’s similar announcement in the midst of a 2014 selloff. He asserted that QE should continue because interest rates were too high (the 10Y was at 2%.)  It’s a great reminder of the Fed’s important third mandate: to prevent crashes.

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Futures are up sharply following NVDA’s better-than-expected earnings alleviated concerns about the prospects for AI-related companies.

The overnight meltup was good for 80 or so points on ES. Another 20 points were added on when September’s jobs data was released, showing that unemployment had ticked up from 4.3% to 4.4%, the highest since Oct 2021. Average hourly earnings rose from 3.7% to 3.8% and hours worked remained stable.

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Futures have rebounded slightly following another negative session, but are nervously eyeing NVDA’s quarterly results due out after the close.

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There’s a famous old quote that advises: “If you find yourself in a hole, stop digging.” This seems applicable in so many instances today: Trump and the Epstein files, AI investment, FOMC policy, crypto investment, the overall economy…

It’s perhaps the principle which best explains what’s happening to the financial markets. There’s a correlation in chart patterns known as the Head & Shoulders Pattern. Once you’ve dropped below and backtested the neckline, there’s more downside than people expect.continued for members… (more…)