It’s been very difficult for the bears to get any downside going over the past two weeks.  Between USDJPY breaking out and VIX melting down, the algos had the upper hand. The KSA troubles were icing on the cake.

Although the initial impact was to inject some much-needed fear into the markets, the algos soon became encouraged by oil’s strength — as was witnessed last night when oil popped over 1% on the opening… …and, sent ES gapping higher by an impressive 19 points — making a lower low and completing a nice little H&S Pattern. No, the bears just weren’t able to get their ducks in a row. But, that was then.

Now, the ducks are very much in a row.  And, from the looks of them, they’re none too happy about having to wait.

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Happy Anniversary!  Today marks 90 years to the day since shares of Hatry Group were suspended by the London Stock Exchange (Sep 20, 1929.)  The company collapsed, crashing the London Stock Exchange.  The Dow began its 89% crash a month later.

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On September 20, 1929, the London Stock Exchange suspended shares of the Hatry group after its founder, Clarence Hatry, was found to have purchased United Steel Companies with fraudulent collateral. The Hatry group collapsed, costing investors billions and sending the London Stock Exchange into a tailspin. This news put US investors on edge.

Stocks are fairly quiet this morning, with VIX off another 3.5% overnight — just enough to push futures up to resistance as algos remain hyper-focused on VIX and USDJPY.Interesting that yesterday’s monkey hammering was enough to push SPX but not ES to higher highs…

However, there was a reason SPX needed to reach 3021.99.

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If you blinked, you missed yesterday’s 25-pt correction and 33-pt recovery during Powell’s testimony.

It was made possible by an equally speedy 8% spike and reversal in VIX.  The selloff continued overnight and VIX is now testing an important channel line for the second time.SPX/ES have very little room to go on the upside before bears run for the hills.  Should be an interesting next few days.

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More data for the hawks, this morning, as starts and permits both handily beat expectations. Which data, exactly, will the Fed depend on in order to cut rates?Futures are off a few points… …(barely) breaking out of a falling channel at the insistence of a slumping VIX.

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Growing up in Texas, you saw a lot of these guys.  They wore clean, polished boots, had the oversized belt buckle. Maybe even a genuine cowboy hat.  But, they hauled paddle boards in their duallies and wouldn’t know which end of a bull to milk (not recommended.)

Likewise, Monday’s action had all the appearances of a sharp sell-off, but wound up being a cheap, drugstore imitation.  Thank the algos, as usual, for turning a potential rout into a mild-mannered slump — at least for now.

Aside from our analog, an alarming geopolitical outlook, and (don’t laugh) iffy fundamentals, the best argument the bears have going for them is still the technical picture.  SPX’s RSI channel makes a great argument for a downturn……though the BoJ clearly has other plans — making new cycle highs and threatening to break out of the falling channel dating back to February.  Really, Shinzo?  You want four more years of this 屎?

Calling an end to the bounce on Friday made me very uneasy — much more so than calling the top in late July.  Days like yesterday, where stocks essentially ignored everything the bears could throw at them, make for sleepless nights.

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If you’ve been under a rock lately, you might be surprised to find oil 10% higher, the world on the brink of a new Gulf War and the stock market not ramping to new highs over the weekend.While higher oil prices are usually a net positive for stocks, this is one of those stark exceptions. Injecting much higher oil and gas prices into an already rocky global economy is not a great recipe for profitability.

The algos are working to hold ES’ “breakout” above its channel top and SMA5 200, but things could change very quickly once the cash market opens. Our analog should get a pretty good shot at playing out today.

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The past few days have seen an escalation in the battle between market forces and Trump’s tweet-driven algos.  Trump and his minions are desperate to see stocks make new all-time highs and have issued a steady stream of breathless trade and tax-related pronouncements possessing little substance but great influence on the algos.

The algos have, so far, been happy to ignore stronger than expected economic data which would ordinarily argue against an FOMC rate cut next week.

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It is perhaps fitting that SPX has waited until today to peak again.  Today is Mario Draghi’s last press conference as president of the ECB but also as presider over the great monetary experiment which has kept the euro zone on life support for the past 10 years.

SPX is poised to reach 3004.51, our favored upside analog target which I had all but given up on.  The futures already reached it and, then some….  …tagging the highest of the targets we set back on Aug 27 [see: Analog on Track.]

Yes it’s very late.  But, as they say…better late than never.  SPX’s version is 3004.51.Whether or not the futures can cling to a small gain until the cash market opens is irrelevant to.  From a Fib standpoint, yesterday’s finish is close enough.  What matters is whether we get the swift downdraft to new cycle lows that the analog forecast in July.

Meanwhile, core CPI just topped estimates, reaching levels not seen since September 2008.  More fuel for the no-rate-cut camp.  With the Fed unlikely to unveil any dovish surprises next week, stocks will have to rely on Trump’s next trade-related-say-whatever-it-takes-to-reach-new-highs tweet.  It has always worked before. How many times, however, will the algos fall for this crap?

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Continuing the string of data arguing against a rate cut, PPI and Core PPI both came in hotter than expected.  Core increased 2.3% from August 2018.Futures, which are in levitation mode after a sharp intraday recovery yesterday, barely noticed.  Virtually nothing has changed from yesterday’s forecast.  Though, we have an important EIA report coming out at 10:30am which should help determine whether oil can continue its improbable bounce following John Bolton’s resignation.

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Most of the signs are not very bearish.  We haven’t had a decent reversal candle.  VIX is in the basement. The moving averages are all wrong.  But, our analog says otherwise.  So, let’s be bearish, shall we?

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