We’ve seen a lot of interpretations of the bad news/good news story over the past five years.  We’ve become inured to the idea that bad news is good, because it ensures continued central bank easing — which is supposedly good for the “markets.”

So, with ever louder cries for rate and policy normalization, and all eyes on the Jackson Hole confab, it’s not too surprising that the futures aren’t loving this morning’s strong durable goods beat.  There was a lot under the hood on this report, namely:

• Durable goods new orders +4.4% vs 3.3% exp.
• New orders ex-transportation +1.5 vs 0.5% exp.
• Non-defense cap goods ex-aircraft +1.6% vs 0.3% exp.

While it was a nice month-over-month beat, the year-over-year comparisons were atrocious:

• Durable good orders -6.4% (2nd big annual drop in a row)
• Capex shipments non-def, ex-aircraft -9.5% (unadjusted)

The futures are off across the board, with CL notably well on its way to our downside target and stocks likely to follow.  Our downside targets from last week and our Aug 3 analog remain in place.

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If SPX is able to break below yesterday’s lows, then 2165.24 is next up.  However, as I noted yesterday afternoon, it graced the midline of the rising white channel.  So, absent an intraday dip to 2165, those lows could hold — even if it meant the purple channel bottom tag doesn’t happen.ES still appears to have lower prices in mind, so we’ll have to see what happens if/when we reach 2165. VIX is promising, having made a higher high yesterday.  FWIW, there’s a gap at 14.33 that still needs filling.  And, a tag of the SMA100 at 14.56 makes for a nice target.

And, CL has a clear path to 45.43-45.65.

USDJPY is all set to put the brakes on, if necessary, with a break out of this arbitrary, completely meaningless little triple top.

I’ll also be watching the dollar index, which may finally have finished its backtest.

Last, NKD — the most often and easily manipulated of all the indices I watch, is signaling additional downside with a break of the white TL from Jul 7.

UPDATE:  9:59 AM

CL just spiked above its SMA10, making a strong bid to end this morning’s sell off.  I’d remain on the sidelines unless SPX breaks through some of the considerable overhead resistance.

UPDATE:  10:07 AM

SPX just reached the red channel midline on CL’s spike.  I’m inclined to take a shot at shorting here at resistance, but CL has little overhead resistance except a minor TL at 47.40.  And, SPX is now above both its SMA5 10 and 20.  So, be cautious.

UPDATE:  10:34 AM

Though CL backed off its threats and is once again below the SMA10, VIX is threatening to break down.  Things are looking rather dicey for a 10 point drop for SPX.  Again, watch your stops closely.

UPDATE:  11:03 AM

SPX just shot up past the red midline and the SMA5 60 on a resurgent CL and VIX smackdown.  I’d ditch the short on any sustained move through the SMA20.

UPDATE:  2:53 PM

I have to run out for a meeting.  SPX appears to be on track for a tag of 2165.  But, it also appears from CL’s spike a few minutes ago that they might delay it until tomorrow morning — which of course would entail overnight risk.  I believe the target will be reached, and would hold short for it, even overnight, unless the risk is an issue for you.  BTW, the .618 at 2165.24 is the nominal target, but the actual bottom of the purple channel is closer to 2164.30.  So, we could get a slight overshoot.  And, remember, ES offers a much lower target (2147.)  So, if SPX accelerates through 2165, I’d not be in a hurry to cover the short.  GLTA.