Let’s talk about inflation. At 0.4%, both headline and core handily beat consensus of 0.3% and 0.2%. Why?
This morning’s CPI release is a treasure trove of information regarding price action in the general economy. On an annual basis, energy tanked and food soared. MoM, food was still strong while energy and used cars soared in value.
So far, the market isn’t concerned. It should be.
continued for members…
Unless oil and gas prices drop sharply, the monthly energy inflation will start showing up in the annual figure early next year. Right now, the 3.9% monthly increase in motor fuel is problematic, contributing to a rate which, if annualized, would top 3.5%.
Note that the 1.7% YoY core figure is pretty strong under the current economic circumstances, especially since it fails to reflect what’s happening in the housing market. The 1.3% headline number is that low only because of the oil/gas implosion. Once the YoY oil/gas comps start to strengthen beginning in January, CPI will most certainly top 2.0%.
All the more reason for oil and gas to continue selling off. Note that RB is testing the midline of the falling white channel, with nothing much to prop it up below that.
CL has already backtested its .786 channel line and is likely headed back to its midline – currently 22ish – in the near future. 
Needless to say, this will place pressure on stocks to perform. But, the alternative is much worse. Imagine rising interest rates shooting higher with the amount of debt the country (world!) has taken on lately.
The Fed has done an outstanding job of depressing rates and keeping the yield curve under control. But, it might not be so easy with CPI closer to or above 2%. 
The USDJPY is seeing a bullish 10/20 cross this morning, but I wouldn’t put too much stock in it as the SMAs have been within inches of one another since Aug 13.
EURUSD is milking its rising white channel for all it’s worth – not breaking down but not breaking out.
This has allowed DXY to go sideways since late July. 
ES and SPX are still on track:
…provided VIX doesn’t break down in the next few hours. 
UPDATE: 3:53 PM
Once again…a massive move in VIX (30%) just to limit ES to a 1.4% drop and keep SPX in the green. Everything else is going the bears’ way.
