Maybe the Fed had it right, leaving the door open to higher inflation. Though August headline PPI came in slightly higher than expected at 0.3% vs 0.2%, core PPI rose 0.4% versus 0.2% expected.

S&P futures sold off 8 points on the news, but the algos had other ideas. As is often the case, “someone” hammered VIX and it tumbled back below its 200-DMA at 8:39. The algos were only too happy to oblige, breaking ES out of its latest falling channel.

Honestly, who needs economic data? Why not just have the Fed trading desk announce the day’s high, low and close every morning?

continued for members…

The bigger picture:SPX had already broken out of its falling white channel yesterday. This should put it back near the red TL it already backtested. Note that in this range, it is also backtesting the rising white channel .236 line, with the channel bottom at 3275ish still the most appealing target.

COMP’s chart suggests a backtest of the SMA20, currently at 11,389. Note that the SMA10 is headed for an intersection Needless to say, if it drops through the SMA20 we’ll get a continuation of the selloff which started last week.

VIX is left dangling without much support other than the SMA10 at 27.39, which is still bearishly aligned FWIW, and the white channel midline at 25.89. The SMA20 and SMA50 lie just below the midline.Oil and gas settled lower overnight – the better to rally into the EIA inventory report from, I suspect. I would want to revert to short on any drop through CL 36.46 and RB 1.09.  Both are still bearishly aligned. The EURUSD channel held again, meaning that DXY continues to get clobbered as expected. No change for the USDJPY. It’s still barely in a bearish 10/20 cross but sitting just above both moving averagesAll this is beneficial to gold and silver, which are up nicely on the day. GC is getting close to reverting to a bullish 10/20 cross, something SI accomplished back on June 30. The 10Y is ramping again on the day – but I expect it to fail again. This is still nothing but a continuing backtest unless it tops the dashed rising red line.UPDATE:  EOD

All’s well that ends well, I suppose. ES’ early pop helped establish the top of a pretty well-formed falling channel, while SPX is likely going to backtest its broken channel.

Even VIX has developed a nice series of parallel lines – though I wouldn’t really characterize it as a channel.

more later…