Every economist is familiar with the Mark Twain quote: “There are three kinds of lies: lies, damn lies, and statistics.”  Unemployment, money supply, GDP – they’re all massaged and redefined on a regular basis to maintain a more positive narrative – to “catapult the propaganda” as George W. Bush used to say.

This morning’s big lie was all about inflation – the measure of the increase in prices which affects everything from cost of living increases to interest rates.  It took all of 10 seconds to spot the lie regarding February CPI.

Gasoline prices did not rise 1.5% over the past 12 months. AAA shows a 19% YoY increase.Gas Buddy reports a 10% YoY increase. Even the government’s own EIA data show a 2.7% increase.

Why roll out an artificially low number? The sharp rise in oil/gas prices since last Spring, while very beneficial to stocks, will send CPI soaring starting next month.

Enough analysts have already done the math on this problem that interest rates have almost doubled in the past month. Given the enormous amount of debt on government and corporate books, this has the equity markets and the bond market on edge.

Easily distracted as always, the algos are naturally much more focused on the “breakdown” in VIX.

Programmed to be blissfully ignorant of the kicked can, they have enabled yet another breakout in futures. After all, could higher inflation and interest rates really be a problem if equities are still rallying?continued for members…The usual suspects driving today’s rally…

Although it’s questionable whether it will hold, I’ve sketched in the H&S Pattern for ES.

The intersection of the yellow midline and Feb 2020 high at 3397.50 still makes a lot of sense – if it can manage to break down. The H&S targets pretty close to it, actually just below the SMA200 at 3473.VIX can easily break down from here. The currency picture… Oil and gas are still trying to make up their minds…

UPDATE:  3:50 PM

On the brink of breaking out/down.