My two favorite Powell quotes from yesterday’s senate testimony:  “I don’t see us wanting to run through the bond market like an elephant snuffling out price signals and things like that” and “We want to be there if things turn bad in the economy or if things go in a negative direction.”

Without question, the Fed has snuffed out price signals in service of keeping “things” from going in a negative direction. Translation: we have and will continue to manipulate bond yields (and currencies, volatility and oil prices) whenever necessary to prevent (1) yields that would otherwise spike higher from bankrupting the country; and, (2) stocks from falling.

Look for more of the same doublespeak today.

continued for members…The question remains: is the goal a slightly higher high going into OPEX and the end of Q2 or will they be content to keep things from crashing? The charts aren’t much help at the moment.

ES has been all over the map but is currently back above its yellow TL from 2018. SPX closed below its, but should pop back above it on the open.

VIX remains non-commital, threatening lower but keeping plenty of powder dry. The SMA10 remains above the SMA20, and VIX remains above both – bearish for stocks.

As expected, CL has exited the falling red channel in favor of a less bearish purple one. And, there’s no guarantee it won’t pop up to 41.05 by the end of the week.

USDJPY remains stuck going sideways, but note that its SMA10 has just passed below its SMA20 – bearish for the pair and for stocks.  It’s doing its best not to break down, but it looks rather weak here. Plenty of downside targets starting with the .618 at 105.20. NKD’s little red TL reinforces the bearish signal – at least so far.EURUSD is also seeing a bearish development with its SMA10 dropping through its SMA20.

The bond market remains quiet, with the 10Y dropping slightly but still in a holding pattern. The 2Y and 2s10s are still in the safe zone. Bottom line, we remain in a holding pattern. Even though AAPL has slipped to new highs…… the Dow is stuck at its SMA200 — though the gap and the .886 remain legit upside targets.We sometimes see a selloff following Powell testimony, as the games played to prevent a concurrent plunge let up a little. If so, ES’s 2.618 at 3076.93 and SMA200 at 3013.77 stand in the way of a test of the SMA50 at 2930.  For SPX, support is at its 2.618 at 3047.34, the SMA200 at 3015.77 before the gap leading to the SMA50 which will reach the white .618 at 2934.49 in the next day or two.

There are enough signals, especially the moving average crosses in VIX and USDJPY, that I’m still bearish – though I can’t rule out a delay or even slightly higher prices over the next few sessions.

One unrelated random thought on the political front. I do my best to stay out of politics other than to speculate on what might happen and why.  But, an interesting scenario popped into my head.

Given that Trump’s poll numbers are slumping, I wonder at what point the establishment Republican party will start to distance themselves (losing the White House would be a blow, but losing the Senate would in many ways be worse.)  Trump is clearly a polarizing figure, with most people either loving him or hating him.

The third group, those who have found it advantageous to cozy up to him and his base, include many powerful party figures who would cut and run if it would save their jobs.  If we get closer to November and it looks like he’s going to lose – and take them down with him – will they perhaps approach him with a deal?

To wit: Trump would resign and pull out of the election over health issues, allowing him to save face and permitting Pence to step into the lead. Pence is popular enough with the MAGA crowd that he would retain all of their votes and just central enough that he would be at least slightly less objectionable to centrists and never-Trumpers.

If Pence won the general election, he could protect Trump from likely criminal prosecution with a pardon. If he lost, well…no harm done.  Naturally, the whole scenario would rely on Trump’s falling further in the polls to the point where even an electoral college victory is beyond reach.  Food for thought.

Powell’s testimony before the House gets started at 12:00 today.

UPDATE:  3:45 PM

Basically a repeat of yesterday, except we have the three 10/20 crosses to consider. I’m still feeling bearish, though OPEX has often screwed the bears’ pooch. Use caution.

more later…