Futures are again backtesting the 200-day moving average as we approach the open.

continued for members…

We have the makings of a triangle that, for now, is holding a TL off its lows from last Wednesday. The bigger picture shows the TL from November is also still in force. Note that after making new lows, VIX is back above the August mark. Things are getting interesting on the currency front. DXY has supposedly bottomed out on the purple channel midline, but EURUSD keeps nudging higher (without justification, I should add.) I believe this reinforces the idea that USDJPY is ready for the major move higher.

As we discussed last week, SI had little overhead resistance to worry about once it broke above the SMA200. It has now reached its white .618 at 23.69 and, given the likely DXY bounce here, is probably due for at least a pause – if not a reversal. I would be careful playing the long side at this point for SI or GC. When these flag patterns run their course, the downside has been significant. BTC has also done better than expected, but has yet to prove anything other than that it’s negatively correlated with USD.

CL and RB are both getting a bounce on the news that China is relaxing its COVID restrictions. So far, neither has really impressed much. Though, as we noted on Nov 28, the channel bottom tag could be all the downside we get for CL. Keep an eye on CL’s SMA20, which is due a backtest. RB’s bounce has been more modest and it continues to falter below its SMA10.

The net result is a slight bounce in the 10Y.I expect the year end magical levitation to continue – until it doesn’t. With a Fed decision, PPI and CPI all coming up, the risk of a downdraft can’t be ignored. Given the strength of the rally to this point and the recession risks which lie ahead, I would expect many players to take their chips off the table in anticipation of a repeat of Jan 2022.

UPDATE: EOD

Nice downside move – but it didn’t really break down. Instead, the rising wedge has been extended another session. When markets are being heavily manipulated, a RW often morphs into a rising channel such as is shown below. Note that the two channels overlap – the top of the purple channel and bottom of the white channel – all the way into January. Not saying it will happen, but it wouldn’t be the first time.