There were two problems with this morning’s PCE print. First, PCE is stuck at 0.3%. Although down from 0.4% in January, it’s still well above November’s 0.0% and December’s 0.1%. Core also repeated Feb’s 0.3% reading (2.8% YoY.)

Second, growth in expenditures continue to outstrip those in income. At some point – and especially now that COVID bonuses are generally depleted – this will increasingly curtail folks’ ability to spend. From the bulls’ standpoint, that’s not a drain we want the economy to circle.

But, VIX sold off sharply for the 5th session in a row, the 10Y fell back from yesterday’s highs, and USDJPY even got into the act. So, futures are up nicely.As we wrote yesterday: “If the 10Y can hold these levels and if PCE comes in on target tomorrow, then ES has a shot at holding the SMA100.” The 10Y did hold, and PCE is close enough to on target, so ES is enjoying a nice bounce off its SMA100 – at least as long as folks don’t think too much about yesterday’s data.

continued for members…

The rest of the charts…

Yes, this is the second time in a row that SPX/ES broke down but got better.  There’s the sharp VIX reversals……the relentless USDJPY advance which just kicked into overdrive… …in order to preserve NKD’s bounce……and, of course, the 10Y’s retreat from our target.

It doesn’t hurt that EURUSD is hanging in there and the DXY hasn’t been able to make new highs (yet.)

Still a concern is oil/gas prices. CL and RB have both pushed back above their SMA10s and CL is threatening a breakout.

As long as SPX and ES can remain in their rising channels, the 10Y doesn’t top 4.74% and the 2Y doesn’t top 5%, and oil and gas prices don’t rally, the improbable equity rally will probably continue. At some point, it will require that VIX drop through its SMA50 and SMA200 (both at 14.85) and even the purple TL at 14.

Perhaps the prospect of Fed presidents being replaced by handpicked Trump sycophants will keep the Fed hard at work navigating the path to SPX 5337 or even 5638. But, there are plenty of obstacles to overcome. So, the path remains risky.

GLTA