Futures are flat ahead of today’s important initial claims data and tomorrow’s PCE print. These will be among the most important data for the FOMC’s rate decision next week.

If the Fed is looking for weak jobs data, this morning’s print will be the last best chance to justify a rate cut.

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Currencies are still on track to go nowhere, with EURUSD’s SMA200 tag coming up… …and DXY still undecided.But, keep an eye on SI, which is coming up on our 60.20 target – important Fib resistance – while GC is still having trouble breaking above 4223.

Big downturns in December are very unusual. But, there’s a lot riding on the Fed’s upcoming rate decision.

I will be on the road tomorrow and early next week. So, I’ll only post if something unexpected occurs.

GLTA

Futures are up modestly after mixed economic data further muddles the rate cut picture.

ADP reported that 32,000 jobs disappeared (versus est +10,000) in November. But, the losses were much worse for small businesses which lost 120,000 jobs (the largest one-month decline since May 2020) compared to a gain of 90,000 jobs at large employers (those with over 50 employees.)

The rest of the data was mixed, with some prints arguing for a rate cut and others against one. That’s the story of this market, right?  At least to hear the administration tell it. The economy is doing great thanks to the administration’s masterful trade policies and the big beautiful bill. But, it’s doing so poorly that we desperately need a rate cut.

Never mind that a 25 bps rate cut wouldn’t do anything stop the bleeding at the smaller companies who would never see any savings from a cut nor at the larger companies which already enjoy low rates. Not would it stimulate the economy other than to inject additional capital into an already frothy equity market.

What the economy really needs is an actual breather, not a 3-week, 5% slump like we just saw but one which can reset financial conditions and reduce inflation and asset prices back to trend.

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We’ll come back to the economic data after looking at some charts.

Stocks remain on the brink of a breakout, meaning also that the rebound might have run its course.

Closing the gap at 6776.4 looks like a gimme, but it should concern bears that a 10/20 cross is imminent. VIX’s bearish tea leaves depend on its RSI holding recent lows.  At this point, there’s enough reason to believe it will – contributing to a risk off picture.

VX offers bears less hope as it makes lower lows.

Currencies continue to waffle, with DXY – currently my favorite canary – again testing its SMA50 while USDJPY fails to rebound off its backtest. If it breaks down, it’s going to be very difficult for equities to break out. The 10Y is testing support yet again.But, the bigger concern for bulls remains the risk of the 2s10s breaking out. It’s currently pushing 58 bps again.

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Futures are moderately higher following yesterday’s failed attempt to notch higher highs.

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The falling white channel is still susceptible to a breakout, particularly in the lead up to an FOMC decision – not to mention the usually bullish year-end gallop to the barn.

Note that the 1.272 extension of the recent pullback is right on top of the 3.618 extension of the 2020-2023 correction (though the SMA200 is sneaking up on the December 2024 highs.)

Currencies continue where they left off yesterday, with USDJPY getting a slight bounce off yesterday’s backtest. DXY is flat.

Futures are off by about 0.60% as December gets under way.

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The strong month-end rally opens up the possibility of a breadth thrust.

But, SPX’s RSI will need to reverse first.

VIX and VX are again at cross purposes, with VIX back to broken out status.As we’ve discussed many times, Japan is facing very problematic inflation which, in turn, could unravel the very beneficial yen carry trade. The devaluation of the yen was predictable, with USDJPY rallying from 139 in April to 158 about a week ago.

Ueda’s comments last night suggest the BoJ is considering a rate hike in the Dec 18-19 meeting which, of course, strengthened the yen nicely.

The EURUSD has been less predictable. The pullback to the SMA200 at the intersection of the channel midline never materialized but, instead, has yielded a well-managed shuffle  which is patiently awaiting the arrival of the rising SMA200.

The DXY is following suit – breaking back below its SMA200 after the brief breakout. Keep an eye on 98.97 as we approach the FOMC decision on Dec 10.

There’s no question that Trump will select a very dovish Fed chair to replace Powell. NEC director Kevin Hassett is all but certain to get the nod – which might result in some of the FOMC members who don’t get the nod acting a little more responsibly with respect to US inflation.

CL and RB are both seemingly chomping at the bit, no doubt being suppressed by our Saudi friends in order to facilitate Trump’s agenda. It comes with a hefty price tag: America’s self respect. The fealty shown to MBS during his recent state visit was beyond the pale.

Meanwhile, the 10yr jumped back above the large white channel midline, suggesting that the momentary dip below 4% might have been a headfake. The charts still suggest a drop to as low as 3.25% in the next few months, particularly if equities hit the wall.

GLTA

Futures are modestly higher despite VIX being crushed by a ridiculous 8%. It’s gotten to the point where there’s not even any effort to mask the obvious manipulation.

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We have to go to the VX futures to see the true state of affairs – a backtest of the large falling purple channel from Jan 2022. This isn’t to say that the channel won’t be violated again, like it was starting on May 12.

Members will recall that Monday, May 12 was the day that Scott Bessent went on CNBC (before the open, of course) to surprise markets with the news that tariffs on China would be slashed from 125% to 10%.

VIX plunged 17% (back below its 200-day moving average of course) and SPX soared 3.25%, gapping back above its 200-day moving average. This followed the FOMC decision on May 7 not to cut interest rates. It should come as no surprise that the meeting with the Chinese was announced on (drumroll please) May 7 as SPX was pulling back from its .618 Fibonacci level.

We’ll be doing a little site maintenance over the next few days, but this situation was too absurd not to mention.

Wishing everyone a wonderful Thanksgiving holiday!

Futures are up modestly after another vol crush ahead of the Thanksgiving holiday.

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Futures are moderately higher ahead of the open and important economic data later this week.

Wednesday’s PCE print is the only official inflation data we’ll see prior to the next FOMC decision on Dec 10.

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Futures reached our next downside target yesterday, though two weeks later than our forecast [see: Not So Fast…] Admittedly, we heard from many naysayers back in October when we posted this chart.

And, this morning…Days like yesterday, where a 120 point overnight rally turned into a 160 point selloff, are enough to scare anybody. But, especially NY Fed President Williams who took time out of his busy schedule to remind algos that there room for “further adjustments” to interest rates.

It reminds us of James Bullard’s similar announcement in the midst of a 2014 selloff. He asserted that QE should continue because interest rates were too high (the 10Y was at 2%.)  It’s a great reminder of the Fed’s important third mandate: to prevent crashes.

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Futures are up sharply following NVDA’s better-than-expected earnings alleviated concerns about the prospects for AI-related companies.

The overnight meltup was good for 80 or so points on ES. Another 20 points were added on when September’s jobs data was released, showing that unemployment had ticked up from 4.3% to 4.4%, the highest since Oct 2021. Average hourly earnings rose from 3.7% to 3.8% and hours worked remained stable.

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