One of the market’s favorite tricks is to close right below resistance and blow through it the following morning on the “strength” of the overnight ramp in the futures.  SPX came within 0.67 of our next upside target yesterday, suggesting a potential downturn, but will blow right through it on the open.  This morning’s ramp job is brought to you by VIX which, despite not making lower lows, has timed its daily collapse perfectly.

The only downside of such maneuvers is that they frequently result in a “pop and drop” – where stocks backfill the newly created gap. It’s a source of irritation to those who bought the open.

continued for members…

SPX is now that much closer to its year-end potential target, but will likely have to backfill first. No major developments, just more of the same with the machinations boosted by year-end window dressing and FOMO in a low-volume meltup.

Oil continues to be stymied by the TL from April’s highs…...while RB continues to pull away from last year’s price range — setting up a day of reckoning for the bond market.There are five weekly price measures in December, three of which have already occurred yielding an average of 2.47 versus Dec 2018’s 2.263 — a 9.14% YoY increase unless prices decline soon.Note that the weekly price checks reflect a modest steady decline, in marked contrast to the futures which have risen steadily since their August lows. Outside agencies confirm the divergence. We’re seeing a continuing impact on the bond market, with the 10Y edging upward while the Fed maintains pressure on short end. As discussed yesterday, this has resulted in a breakout for the 2s10s which leaves stocks extremely vulnerable. RB’s ascent strongly hints at a SMA200 backtest in line with the April and July highs. But, there are easier and cheaper ways to goose the market than gin up a bunch of inflation. It begs the question “why?”

An article on Bloomberg this morning suggests it’s part of the “reflation trade” which has boosted financial stocks which have been mired in a low interest rate environment for years.Gold is still backpedaling, indicating a lack of consensus on rising inflation.

We should have a clearer picture soon, as DXY is backtesting its SMA200 after a channel line breakdown.While there is a positive correlation between DXY and interest rates, it waxes and wanes. When rates plunged alongside oil prices beginning last October, the dollar continued to rise. This was the algo effect, as a rising USDJPY was needed to try and offset the negative impact of falling oil/gas prices. It didn’t work as well as was hoped. The rise from September 2019’s lows are a testament to TPTB’s determination to prevent the same sort of meltdown this year.More later.