The last time VIX cratered to below its 50-day moving average in two days, ES popped over 3%. Then, as now, SPX had committed the egregious sin of dipping below its 10-day moving average as it approached important Fibonacci resistance. The difference, now, is that SPX is on the brink of a breakout above that resistance.
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February headline CPI came in at 0.4% versus 0.3% expected (and January.) Core CPI registered a 0.4% rise versus .03% forecast and 0.4% prior. YoY, headline was up 3.15%, up from 3.09% in January and a slight beat of the 3.1% expected, while core rose 3.8%, down from 3.9% in January.
Shelter and gas price increases were responsible for 60% of the rise in February.
This is in keeping with our Gas v CPI model which shows a slight uptick in MoM pricing in the midst of a YoY decline.
The short-volatility algos were busy this morning, with VIX diving more than 5% in minutes to back below the 200-DMA.
Futures, which might have been expected to tumble on the expectation of further delays to FOMC rate cuts, rallied instead. 
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SPX’s relative strength index (RSI) has been consolidating for months in a series of higher lows and lower highs. It’s the lower highs that should concern bulls, as they represent an unmistakable pattern of negative divergence that almost always ends in a correction.
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Blink, and you might have missed the selloff this morning when nonfarm payrolls came in much higher than expected but the January print was revised sharply lower.
Fortunately, the algos were on it, immediately crashing VIX to a point where a 15-pt decline in ES turned into a 15-pt gain.
This should put SPX at its 1.272 Fib extension, a potentially important level of overhead resistance ahead of next week’s CPI and PPI prints.
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ES came within 6 points of a key Fibonacci level on Monday, and has more recently been making minor pullbacks to test its rapidly rising 10-day moving average. The more important test will likely come next week when CPI and PPI are released.
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As a reminder, we will not be posting March 4 through March 6.
Trade safe, and we’ll see you all on the other side!
We’ve waited a very long time for SPX’s 50-DMA to reach a great spot for a small pullback. It’s finally here.
Will the market cooperate?
NOTE: I will be out of the office between March 4-6, returning on March 7.
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January headline PCE registered a 0.3% increase MoM (0.4% Core) which was in line with most estimates. YoY, headline PCE rose 2.4% versus 2.6% in December, while core PCE rose 2.8%, down from 2.9% in December.
In other economic data, personal income rose to 1.0% MoM from 0.3% in December and personal spending rose at a 0.2% rate versus 0.7% in December.
Algos cheered the data, with futures swinging from a moderate loss to a moderate gain in seconds.
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Futures are off moderately in the lead up to tomorrow’s important PCE print.
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BTCUSD came within 126 of an important Fib level that could represent significant overhead resistance. Traders would do well to limit their exposure here.
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