You could argue that the annual PCE print of 3.6%, the hottest since 1992, is merely a function of the base effect – last year’s crash in inflation.But that argument falls flat when you consider that MoM Core PCE, which is completely unaffected by the base effect, soared by a record 0.7%.

Naturally, both stocks and bonds ignored the data. After all, VIX has plunged 36% in the past 7 sessions, so everything must be okay, right?

Not so fast.

continued for members…

While VIX is indeed continuing to assert its control of the algos…

The downside case is intact as long as ES doesn’t make new highs…… and DJIA backs off its 3.618.

I summarized Wednesday’s info into the SPX chart below, showing our 3 primary downside targets: the yellow 3.618 target, the red SMA200 target, and the purple Feb 2020 high target. 

Whether they come to fruition is anyone’s guess, as the algo factors definitely remain in position to try and offset any serious downside.

CL is threatening to break out of the range from 2019-2020.

USDJPY is threatening to break out of its falling purple channel.And, VIX has plenty of downside potential.But, EURUSD is coming back to earth, which is boosting DXY in a way that usually accompanies a sharp selloff. Even BTC continues to struggle.

And, TNX is overdue for a reaction.

So, until/unless the above mentioned breakouts occur – always a serious risk over a holiday weekend – I remain bearish. If my models hold, right here is where you want to short.As I mentioned Wednesday, I am taking today off to attend to graduation affairs. Thanks for the notes yesterday re my back. Only 20 injections – hopefully effective – and an admonition to give up running, at least for a while.  Sigh…

I wish everybody a safe and enjoyable weekend!